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Harish Damodaran

NEW DELHI, March 1

EVEN though the Finance Minister, Mr Yashwant Sinha, has not explicitly announced the scrapping of the `milk shed' concept in the Milk and Milk Products Order, 1992 (MMPO), a careful reading of his Budget speech makes it clear that he has effectively proposed the same.

There is no reference to milk sheds per se in Mr Sinha's speech, which only states that ``I am proposing...amendment of the MMPO to remove restrictions on new milk processing capacity, while continuing to regulate health and safety conditions''.

According to Mr B.M. Vyas, Managing Director of the Gujarat Cooperative Milk Marketing Federation (GCMMF or Amul), the removal of restrictions on fresh processing capacities effectively tantamounts to abolition of the concept of designated milk sheds.

While the dairy industry stands technically de-licensed since July 1991, the MMPO, however, now requires any dairy plant processing more than 10,000 litres per day (LPD) of milk to obtain Governmental registration. ``But for this, the entrepreneur setting up the plant has to first declare his proposed milk shed area. The registration certificate is issued only if there is surplus milk available in the said milk shed and there is no other plant operating there'', Mr Vyas pointed out.

Under Section 11 of the MMPO, ``every holder of registration certificate shall collect or procure milk only from the milk shed assigned under the registration certificate''. The milk shed, in turn, is defined as ``an area geographically demarcated by the registering authority for the collection of milk or milk product by the holder of a registration certificate''.

Mr Vyas said the main purpose of allocating designated milk sheds was to prevent situations where dairy processing capacities ended up being far in excess of potential raw milk supplies. ``If the total surplus milk available in a particular area is two lakh LPD and there is an already existing two lakh LPD dairy, there is no point giving registration for yet another two lakh LPD plant'', he noted.

But given that Mr Sinha has announced that there would henceforth be ``no restrictions on new milk processing capacity'', it means that the milk shed concept will no longer be a consideration in the grant of registration certificate. ``The registration process would now be reduced to a mere formailty'', he added.

While entrenched players such as Amul and Nestle India Ltd have opposed the abolition of the milk shed concept, those in favour argue that milk sheds confer exclusive monopoly to individual dairies for procuring milk within the designated area. In the process, the farmer is denied the possibility of obtaining a better price for the milk supplied by him.

Moreover, they also add that unlike the past, the country is no longer deficient in milk today and there is no rationale for regulating creation of fresh processing capacities.

But the main point made by Mr Vyas— also echoed by the CMD of Nestle India, Mr Carlo M. Donati— is that assigning specific milk sheds to individual dairies provides an incentive for the latter to undertake farm-level investments in boosting milk yields. ``Milk, one should remember, is produced not from dairy plants, but from the udders of cows and buffaloes. If milk yields have to go up, one has to invest heavily in disease control, genetic improvement of stock, feeding and extension programmes. But no dairy would make these investments, if the gains from these accrue to someone else who poaches into the milk shed area it has nurtured over many years'', Mr Vyas said.

According to Mr Donati, ``we believe that even in a liberalised economy, investments should be protected and not made for someone else''.

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