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.