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					WTO Challenges for Indian Dairy Farmers
N. G. Hegde
Yojana. Vol. 45. Dec. 2001.: 34-35.

Background

Way back in 1947-48, the developed countries in the world had established a working
understanding between themselves for export and import of various commodities
through a common agreement called the General Agreement on Tariffs and Trade
(GATT). Over the past 50 years, there have been eight round of talks to modify the
agreements. The last agreement was in Uruguay in 1994. In 1995, a permanent trade
organisation known as World Trade Organisation was established, represented by 124
countries to facilitate fair trade between the member countries. As India was a
signatory of GATT, she automatically became a member of WTO.

Membership of the WTO was unavoidable as our country had been depending on
export and import for coping up with the domestic needs of technology, machinery
and consumer goods. In the absence of the WTO membership, we had to negotiate
separately with each and every country, which could have placed us at a
disadvantageous position. Thus there was no harm in becoming a member of WTO,
and it did provide us a strong base to participate in international trade. However the
bad part was our carelessness and inability to put forth our demands strongly during
the WTO negotiations to ensure that we were at an advantageous position.

This was exactly what happened to us.

During the negotiations in 1935, we failed to bargain and agreed to allow import of
milk and milk products under zero per cent bound duty. Subsequently, our new Exim
Policy which brought some essential milk products under open General Licence,
further facilitated the import. Initially, there was no threat of import, as the
international price for milk and milk products was high compared to the prevailing
price in India. Subsequently, many developed countries were able to exert pressure
on their government to provide subsidy to dairy farmers which helped them to lower
their price of dairy products. Furthermore, new technological interventions and
improved management practices helped the farmers in the Western Countries as well
as in New Zealand to bring down the cost of milk production. Thus the price for dairy
products in the international market fell far below the price paid by consumers in
India. This provided good opportunities for the traders to import cheaper milk
products and thereby earn high profits, at the cost of Indian Dairy Farmers.

This is the background of WTO and its impact on our farmers. So long as we
continue to remain a member of WTO, this threat will continue to bother us. In 1999,
Indian traders imported 10,000 metric tons of milk powder and in 2000, we were
threatened by the arrival of fresh milk from New Zealand at the landed cost of Rs.9 in
Mumbai. Fortunately, the Government of India in its budget of 2001 has imposed
heavy duty on milk and the problem has been halted temporarily. This duty will have
to be abolished before the year 2006, as per the WTO agreement. Hence we have a
breathing time of 5 years to gear ourselves for the international competition. This is
probably the last chance for our farmers to organise themselves and convert this
challenge into an opportunity.
What are our problems ? Why are we threatened by the international dairy market?
The main problems are high cost of milk production, high cost of milk processing
and marketing and poor quality milk due to unhygienic milk handling.

Reducing the Cost of Milk Production

Our cost of milk production is very high because the average milk yield of Indian
cows is only 987 kg as compared to 6273 kg in Denmark, 5289 kg in France, 5462 kg
in United Kingdom, 5938 kg in Canada, 7038 kg in USA and 11000 kg in Israel.
Naturally, the European farmers do not have to spend 5 times more on their cattle just
because they produce 5 times more milk over the cows in India. We often argue that
it is easy for the European farmers to produce more milk because of cold weather
which is conducive for the cattle. Israel has proved us wrong. The weather
conditions in Israel are worse than India. The temperature in summer exceeds 47 0C-
480C, while the temperature in winter is as low as 40C-5 0C. Inspite of such bad
weather and severe water shortage, the average milk production of dairy cows is
11000 kg / lactation. This has been achieved through proper housing, feed and water
management, apart from superior quality germplasm.

The only disadvantage of Israeli cows is low butter fat. With increasing awareness on
the health problems related with high fat diet, the western countries have started
focussing on breeding cows for high milk protein. In this process, they have reduced
the importance of butter fat. Israel has gone in for selection of cows for high milk and
protein, while sacrificing butter fat. Today, the average fat content of milk in Israel is
about 3.3 – 3.4%. The dairy farmers and consumers are happy that they get healthy
milk at lower cost. Although fat content is low, the average butter production per
cow per lactation is significantly higher than that of the cows in any other country in
the world.

India is still trailing behind in this direction. We are still thinking of milk with 5% or
6% butter fat. We need to come up with a policy of encouraging low fat milk for
general consumption and use buffalo milk only for a selected category of customers
who insist on high butter fat. As buffalo milk with high butter fat can be exclusively
used for domestic consumption, we can continue to manage the buffaloes without any
external threat. Then the milk production can be specialised for healthy, high protein,
low fat milk, at low cost through cross breeding of non-descript cattle, owned by the
small farmers.

Reducing the Cost on Milk Handling

Presently, our dairy farmers get about Rs.7-8 per kg at their society level. This milk is
handled at several levels by a co-operative and a private agency till it reaches the
mother dairy for pasteurization. The milk is further sent to consumers through
various outlets. In this process, the consumer has to pay almost twice the farm price
i.e. around Rs.14-16. The present system is not only unhygienic but also expensive.
There is good scope for reducing the number of agencies handling the milk and
thereby reduce the cost of handling.

We also need to look for an alternative model of milk processing by encouraging
small dairies at taluka and district levels. Small dairies of 5000-10000 litres of milk
capacity which can handle fresh milk distribution and processing of the present Indian
and Western Dairy products such as ice-creams, cheese, etc will not only reduce the
cost of handling and increase the hygienic value of the product but also create
additional value of the product, additional demand for the milk and generate
employment at the grassroot levels. A small dairy of this size should be able to
generate year round employment. Hence we need to set up such dairies on a pilot
scale and observe the advantages. With reduction in the cost of milk handling, there
will be significant change and we will be able to face the challenges of importing milk
products easily.

Clean milk production: Unhygienic milk is the reason for poor quality milk produce
in India. Such production cannot be exported even if there is good demand and
surplus production in the country.      The quality of milk in India is affected due to
poor animal health, polluted food and water and unclean surroundings in the farm. It
is therefore necessary to emphasize all these aspects in the near future.

As our animals are not regularly tested for various diseases, there is a great danger of
some diseases being transmitted to human beings. Unhealthy animals are also
administered with antibiotics and chemicals which cannot affect the quality of milk.
To prevent these problems, it is necessary to take up regular consumption and
screening of the livestock against various diseases. Sufficient emphasis should be
given on preventive health care as well as curative aspects well in time. The quality
of the feed should be checked regularly. Feed and water supply to the dairy farmers
should be free from pollution. This can be done through awareness and treatment of
water wherever necessary. Cleaning of animal, using clean clothes by the farmers,
use of clean vessels for milking and storage of milk are essential to maintain the
quality of milk.

Indian milk products have been often rejected in the export market of the unhygienic
milking and this can be avoided by taking good care on these aspects. There is also
scope for introducing clean milking machine which is cost effective for small farmers.
Such a milking machine can avoid direct handling of milk by the farmers.

Conclusion

To conclude this paper, there is very little breathing time for Indian farmers to face
the challenge of importing milk and milk products under WTO. Our farmers are not
prepared to solve them well on time. It is necessary to reduce the cost of milk
production by increasing the productivity of our animals. We also need to reduce the
cost of handling of milk and processing by reducing intermediary agencies and by
adding value to the produce. The quality of the milk should be of international
standard which can be improved through screening of the livestock against important
diseases and maintaining clean surroundings in the dairy farm. Finally, the policy of
producing low fat milk for general consumption while the high fat buffalo milk can be
supplied to a selected category of customers interested in high butter fat. We need to
discuss with the farmers and understand their problems and solve them at the earliest.
Surely, we also need to strengthen our farmers’ associations to acquire new
technologies, understand the milk marketing scenario at the international level and
find suitable solutions. We hope the task is within our reach for solving. Let us work
in this direction.

				
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