The Hindu Business Line : Ban on milk powder exports set to go

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Ban on milk powder exports set to go

Centre allows shipments against past letters of credit

At a glance
Companies allowed to discharge contracts entered 10 days prior to the ban.
GCMMF, Nestle, Parag Milk have been allowed to export on past LCs.

Harish Damodaran

New Delhi, Aug 7 The Centre is all set to lift the ban on milk powder exports in place since February.

The Commerce Ministry has already started allowing companies to fulfil their past export commitments against letters of credit (LC) opened 10 days prior to the imposition of the ban.

The Directorate-General of Foreign Trade’s (DGFT) notification, dated February 9, had banned all shipments of skimmed, whole as well as infant/baby milk powder till September 30. These even covered committed transactions, against which LCs had been opened before February 9.

“The DGFT is now permitting exporters to discharge their contracts that were entered 10 days prior to the formal date of the ban. This is, of course, subject to verification of the authenticity of the LCs,” highly placed sources told Business Line.

Those who have been allowed to export thus on a case-to-case basis include the Gujarat Cooperative Milk Marketing Federation (GCMMF), Nestle India Ltd and the Pune-based Parag Milk and Milk Products Pvt Ltd.

GCMMF is said to have got the go-ahead for around 2,000 tonnes, while Parag’s contracts against stand-by LCs is to the tune of 400 tonnes. Nestle’s shipments pertain to infant milk powder of some 50 tonnes.

“This is the precursor to a complete lifting of the ban, probably by early September. The Agriculture Minister, Mr Sharad Pawar, is keen that it goes immediately (which he, in fact, indicated only last week at a function in Vadodara,” the sources noted.

Prices down

Over the last one month, prices of skimmed milk powder (SMP) in Delhi have dropped from above Rs 145 a kg to Rs 130. With the good monsoon rains ensuring abundant fodder availability, prices are likely to drop further, which would result in dairies lowering the procurement price of milk.

“The ill-timed ban on sugar exports last year depressed price sentiments to the extent that today mills owe thousands of crore in cane arrears and the Government is being forced to dole out all kinds of export and other sops. The fear now is that milk will go the sugar way,” the sources pointed out.

In the case of milk, there is already a surplus situation developing in the South and West. In Mr Pawar’s own State – Maharashtra – farmers have been agitating during the past two months for higher milk prices to compensate for the steep rise in costs of maize and compounded cattle feed.

“The only silver lining is that unlike for sugar, international SMP prices are still ruling firm at over $5,000 per tonne and look unlikely to fall in the immediate term. Even if they drop to $4,000 and the dollar plunges below Rs 40, it would keep effective realisations in the Rs 140-150 per kg range,” the sources added.

The country’s exports of milk powder peaked at 50,500 tonnes (Rs 500-crore plus) in 2005-06.