Window of Opportunity for India

Conditions are ripe for an upturn in India's dairy sector. The government has lifted its ban on the export of milk powder at a time when increasing demand is sending prices of dairy products skyrocketing globally. If the market worked on a straightforward play of demand and supply, Indian producers- most of them small-scale operators- would have been cheering. But the market does not: paradoxical though it might sound, despite the advantageous global situation profit margins are shrinking and many small dairy owners have folded up.

"Profit margins have halved because fodder prices have increased and the animals need a lot of expensive medical treatment. For me it is now a hand-to-mouth existence," says Ajay Pal of UP's Ghaziabad district, who used to make a profit of Rs 15,000 a month from 25 buffaloes two years ago. Ajay Pal says he has increased the price of milk by just one rupee- to Rs 20 a litre- over the past year.

Ajay Pal's case looks curious considering that internationally dairy product prices have shot up by 46 per cent in just five months, from Nov 2006 to April 2007, according to the UN FAO. The spurt in demand has come mainly from emerging economies such as China where people are consuming more milk products because of an improved standard of living.

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Source: Central Chronicle

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