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Uncle Sam to milk India? Modi 'offer' to bail out US dairy industry may hurt Gujarat most

By RK Misra*
There is an element of irony as India and Gujarat rolled out the red carpet to welcome US President Donald Trump. The Narendra Modi government move to give the US access to its dairy and poultry markets may help bail out the US milk industry but is set to hurt Gujarat and consequently India the most.
According to a report in 2017 India contributed 21 per cent of the world’s milk production making it the largest milk producer in the world. This was made largely possible by 73 million marginal farmers and landless labourers working in the dairy sector and possessing an average of one or two milch animals.
The World Dairy Situation Report, 2019 states that the US milk yield per cow is the highest in the world at 10,500 litres per cow as against 1,715 litres per cow in India which is the second lowest in the globe ,only after Pakistan.
As a big-wig of the co-operative dairy sector in Gujarat put it on condition of anonymity, a trade deal with India may help Trump in his election year, but it will be detrimental to the Indian dairy industry and the livelihood of over 10 crore marginal farmers whose sustenance depends on it.
Gujarat remains the nurturing cradle of the dairy cooperative industry in the country. Indian dairy cooperative company, Amul, a brand managed by the Gujarat Co-operative Milk Marketing Federation (GCMMF) which has 3.6 million milk producers as it’s members enjoys a revenue of Rs 380 billion (2018-19,US$ 5.3 billion).The bulk of these are small and marginal farmers or landless labourers.
Political chess moves are deceptive . ‘The Howdy Modi’ event in Houston last September with the Indian Prime Minister exhorting "abki baar Trump sarkar" to expat Indians was great optics but trade talks between Washington and New Delhi slowed down to a crawl thereafter.
And this despite a trade deal with New Delhi ensuring greater market access for the US would bolster Trump’s position in an elections year. He has already signed a phase one agreement with China and a USMCA ( United States-Mexico-Canada) deal.
India wants exemption from high duties imposed by the US on steel and aluminium products and export benefits to some domestic products under the generalised system of preferences among others . The US, on the other hand, wants greater market access for its dairy products, farm equipments , medical devices, and a host of others.
Sources say, India has yielded ground and made known its willingness to give way on market access to US dairy products and a cap on medical device prices, even a cut in import duty on Harley-Davidson motor cycles. This does not bode well for the domestic milk sector.
Sources say, India has yielded ground and made known its willingness to give way on market access to US dairy products and a cap on medical device prices
That the US milk industry is in trouble is borne out by a very recent "Time" magazine report about falling milk consumption in Trump’s country necessitating urgent bail-out measures. Americans each drank 146 lbs of fluid milk in 2018, according to the USDA's Economic Research Service, which is 26 per cent down since 2000.
It is such and other factors which have led to Dean Foods, America’s largest milk producer, filing for bankruptcy protection last November. Borden dairy, another big name has followed suit thereafter.
”Declining sales in a thin margin business is not a good recipe for success", Mark Stephenson, director of dairy policy analysis at the university of Wisconsin has been quoted by the magazine as saying in its January 20 issue. According to the report there were 605 fluid milk plants in America in 1990 of which only 450 were left by 2018.
Indian milk cooperatives and private dairies have been opposing opening Indian markets to global milk producers at the cost of Indian farmers, even otherwise. They had even petitioned the government to keep the sector out of the Free trade Agreement (FTA) under the Regional Comprehensive Economic Partnership (RCEP) which India chose to keep out of last year.
Niti Aayog has projected India’s milk production to touch 330 mt by 2033 from the current 180 mt and the demand projection is around 292 mt which proves that the country does not require to import milk or milk products to take care of its population even over the next ten years.
According to available data US exports in dairy trade with a global export share of 4.9 per cent as against an import share of 2.8 per cent in 2018. India, on the other hand, is Lilliputian in comparison with a share of 0.3 per cent and 0.06 per cent in global dairy exports and imports respectively in 2018.
As per a report by the Agriculture Skill Council of India while crop production generates 90 to 120 days employment to the rural work force, the dairy sector provides alternative employment and income throughout the year and accounts for 20.6 per cent of the combined output of paddy, wheat and pulses.
Dairy industry sources state that US farmers are large dairy farmers who benefit from economies of scale but they get only 43 per cent of what the consumer pays which is 1:4 times lower than that of India. Notwithstanding the lower milk yield, India still remains comfortably placed to produce milk at a cheaper rate.
Opinion is strong that the US access in this sector is not only not in the interest of the dairy industry in India but is bad news for millions of poor and landless farmers, particularly women in the rural areas who are its mainstay. Moreover it will a setback to the Prime Minister’s stated resolve of doubling farmers income by 2022.
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*Senior Gujarat-based journalist. Blog: Wordsmiths & Newsplumbers

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