Three schemes proposed to help milk unions tide over working capital crisis

The State government on Wednesday introduced three schemes to help cash-strapped Karnataka Milk Federation (KMF) and milk unions across the State to make payments to dairy farmers.

The decision has been taken to help 20 lakh farmers and their families who depend on dairy farming. As a first step, the government will provide interest subsidy over and above the 4 per cent rate of interest towards the working capital loan required by KMF and its unions to make timely payments to milk producers (for a period of six months), said an official release from the Chief Minister’s office.

Secondly, the government will recoup to KMF and unions the cost towards reprocessing of old skimmed milk powder (SMP) to ensure that the powder does not deteriorate.

The government will also share the loss from distress sale of SMP at a price lower than the cost of production for the current financial year. This means that the government will share 50 per cent of the loss due to distress sale of SMP below Rs. 180 a kg, the cost of production, from October 1 to March 31, 2013.

The KMF, the release said, is unable to sell the stocks of SMP due to countrywide surplus and a slump in the price of the powder. The inability to sell SMP has created a shortage of working capital for the unions.

Timely move

KMF Managing Director Harsh Gupta told The Hindu that the government’s intervention was timely and would help the unions tide over the crisis. While the cost of production of SMP is about Rs. 180 a kg, it is being sold between Rs. 127 to Rs. 130 a kg, causing a loss of Rs. 50. The government’s gesture to share half the loss is definitely a breather to the unions, he said.

Every month, the unions produce about 2,500 to 3,000 tonnes of SMP and it is not possible to scale down the production, which is directly linked to procurement of milk, which also cannot be scaled down.

Hence, increasing the shelf-life of SMP is a better idea andthe government has agreed to bear this cost, he said.

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