It was a routine policy decision that ended up with a lot of milk flowing down the drain in Tamil Nadu. In February, a severe shortage of milk forced the Centre to ban the export of skimmed milk powder (SMP). Six months on, milk production stabilised but the ban stayed and the state doesn’t know what to do with its overflowing milk supplies — reports say some farmers are dumping their stocks into rivers.

The only way to preserve surplus milk is to convert it into milk powder. But this is where Tamil Nadu’s problems begin. The state has a poor SMP processing capacity. While its milk output is 54.74 lakh tonnes a year, its SMP capacity is only 100 tonnes a day. Gujarat, with an output of 69.6 lakh tonnes, has a processing capacity of 160-200 tonnes in each district.

“We used to sell our surplus to dairies in Andhra, but now even they don’t want it since their milk powder stocks are piling up,” says Suresh, manager at Winner Dairy in Pondicherry.

On February 9, following a shortage of milk and milk powder in north and western India, the government banned the export of SMP. The shortage was brought about by heavy rains in some parts of India last year. In the months that followed, producers tackled the shortage by converting milk powder into liquid milk. The milk industry relies heavily on milk powder during lean seasons.

All this while, SMP prices climbed steadily in the international market, spurred by a shortage of skimmed milk powder. India, whose milk powder exports touched a high of Rs 41,844 crore in 2005-6, had to stop its exports as stocks of milk powder at home were fast depleting and SMP prices went up to nearly Rs 145 a kg in January.

... contd.