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Rediff.com  » Business » Unlike Amul, other players say no to milk price rise

Unlike Amul, other players say no to milk price rise

April 05, 2012 10:18 IST

MilkAmul, India's largest milk brand, has hinted at a retail price rise, but dairy companies in North and South India are unlikely to follow in the near future.

While Amul recently expressed its intentions to raise pouched milk prices by five-seven per cent, or about Rs 2 per litre, other leading producers like Mother Dairy, Paras and Hatsun seem to be in favour of keeping prices unchanged.

"There is no reason for raising milk prices. Abundant availability is there in the market and farmers are getting sufficient procurement prices in other parts of the country.

"Amul, however, pays the highest procurement price, which prompts other dairies to follow the trend. But the current year seems promising for milk production.

"Hence there is no need for a price rise, at least for two months or before June," said Rajendra Singh, managing director of Paras Dairy, one of the top three producers.

In Delhi, Mother Dairy sells full cream milk at Rs 37 a litre, toned at Rs 29, and double-toned milk at Rs 25 a litre.

It sells skimmed milk at Rs 21 a litre.

Amul sells two varieties in Delhi -- Amul Gold (full cream) and Amul Taza (toned) at Rs 38 and Rs 29 a litre, respectively.

Paras Dairy, the private player, has maintained its prices almost at par with those of Mother Dairy's.

But it sells its full-cream variety cheaper by Rs 1 a litre in Delhi.

Paras sells close to 400,000 litres of pouched milk in northern markets such as the national capital region and Lucknow.

Industry insiders maintain factors such as procurement price, packaging cost, cost of fuel, electricity and logistics influence the retail price of pouched milk.

Input costs for dairies have gone up because of an increase in the excise duty.

The packaging cost has gone up marginally.

However, most dairies have absorbed the rise in the excise duty.

"We are not increasing milk prices. There is a negligible hike in the packaging cost, but we'll absorb it," said R G Chandramogan, chairman and managing director of Chennai-based Hatsun Agro Product Ltd.

Mother Dairy didn't answer an emailed query, but sources said it might not raise its milk prices.

For cooperative and private dairy players, procurement cost constitutes the largest part of the total cost.

The procurement cost in Gujarat has remained higher than in other parts of the country. While Amul pays Rs 32 a litre (for seven per cent fat), most dairies in other parts pay in the range of Rs 28 to Rs 30 for a similar quality of milk.

"Cooperative dairies, particularly in Gujarat, pay high for milk procurement.

"This trend is not seen in other states, even where Mother Dairy has procurement operations.

"This means even Mother Dairy doesn't pay as much as Amul does.

"Therefore, there is lesser burden on dairies in North India to pass on to the consumers," said a source, who operates a milk processing plant at Dholpur in Rajasthan.

To keep farmers interested in industry, dairies increase procurement prices at irregular intervals.

"Last year, we paid 11 per cent more to milk farmers, while this year, we will give 14-15 per cent more procurement price to farmers," R S Sodhi, managing director of the Gujarat Cooperative Milk Marketing Federation Ltd,  had said earlier this week.

Unlike dairy players in other parts of the country, private dairies in Gujarat take price guidance from Amul.

"We follow Amul for deciding the retail price of packaged milk.

"Our prices are at par with Amul. So, if Amul hikes its prices, we, too, will rise the prices to the similar extent," said Jayesh Patel of Vimal Dairy, which sells packaged milk in parts of Gujarat.

Rutam Vora & Kalpesh Damor in Ahmedabad
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