Tamil Nadu government not in favour of subsidising milk tariff

Chief Minister had to take holistic view of the financial position of the government.

The State government does not seem to be in favour of the idea of providing subsidy in the milk tariff to the cooperative dairy sector.

“We have in the past requested the government to provide us with such support. But there has been no such practice,” K.T. Rajenthra Bhalaji, Minister for Milk and Dairy Development, told The Hindu on Monday.

Chief Minister Edappadi K. Palaniswami had to take a holistic view of the financial position of the government as well while considering the question of tariff subsidy.

Bearing the burden

The Minister was responding to a query as to why his department should not seek tariff subsidy on the lines of what was being given to the State Transport Corporations (diesel subsidy) and the Tamil Nadu Generation and Distribution Corporation (power subsidy).

When asked why the government could not absorb, at least partially, the burden of additional expenditure caused by the increase in the procurement prices instead of passing it on completely to the people, he said: “I will convey this to the Chief Minister.”

The justification provided by the government is that it had to resort to raising the selling price of milk by ₹6 per litre in view of the hike in the procurement prices of cow and buffalo milk by ₹4 per litre and ₹6 per litre, respectively.

Operational costs

Assuming that the daily procurement of milk is around 33 lakh litres, the rise in the procurement prices will take the annual bill up by about ₹480 crore. Without any corresponding increase in revenue, it would have been extremely difficult to run operations and make payments to dairy farmers. The Tamil Nadu Cooperative Milk Producers’ Federation (TCMPF) and 19 District Milk Unions will be forced to face losses, asserted officials of the State government and the Federation.

‘Tentative profit’

It is against this context that the idea of tariff subsidy is being mooted.

According to the Policy Note of the Dairy Development Department for 2019-20, the Federation and 15 District Unions reported “tentative profit” during 2018-19. An official of the Federation expressed the hope that four other District Unions - Dharmapuri, Vellore, Salem and Tiruchi – which recorded “tentative loss” last year, will be able to make a turnaround this year with the increase in the selling price.

“Of late, the focus of the cooperative dairy sector has been on increasing its profitability by selling more by-products than milk per se,” the official added.