Disinvestment Policy: Budget proposes new Rs 8,000-crore Dairy Industry Fund
Arun Jaitley has said the fund, with an initial corpus of Rs 2,000 crore and to be quadrupled in three years, would be used to enable expansion of milk processing capacity in the country.
The dairy industry is awaiting the fine print of the proposed Rs 8,000-crore Dairy Processing and Infrastructure Development Fund to be set up under the NABARD. In his Budget speech, FM Arun Jaitley has said the fund, with an initial corpus of Rs 2,000 crore and to be quadrupled in three years, would be used to enable expansion of milk processing capacity in the country. But there are no further details, including in the expenditure budget statement of the Department of Animal Husbandry, Dairying and Fisheries or even the Department of Financial Services.
“On paper, it seems a good scheme. An average dairy with two lakh litres per day (LLPD) milk processing capacity would require an investment of about Rs 35 crore. With Rs 8,000 crore, you can establish capacities aggregating over 450 LLPD. At an average procurement price of Rs 30 per litre, this investment can help pump in over Rs 49,000 crore annually to farmers,” said RS Sodhi, managing director of Gujarat Cooperative Milk Marketing Federation, which owns India’s largest dairy and food brand, Amul.
He notes that there has been no government programme for investment in the dairy sector since the Operation Flood that was implemented by the National Dairy Development Board during 1970-94. In his speech, Jaitley has admitted that a large number of plants set up under the programme have since turned “old and obsolete”.
Welcoming the proposed fund, RG Chandramogan, chairman of Hatsun Agro Product Ltd said that the current domestic milk processing capacity was about 850 LLPD. That included 450 LLPD of private dairies and 400 LLPD of cooperatives. “I hope the benefits of this fund would be extended to private dairies and not limited to just cooperatives, as it was during Operation Flood. Most of the capacities in the last decade or more have come up under the private sector, without any government assistance,” he added.
It is not clear what the monies under the proposed fund would be used for. “The fund could probably invest through equity contribution or provide interest subvention against loans raised by dairy companies/promoters. Either way, it would encourage investment in new dairies”, another company official said. ‘Dairy India’, an industry publication, has pegged the Indian market for milk and dairy products – in terms of the value paid by consumers – at Rs 5,26,403.6 crore in 2015.
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