FDI in Dairy industry in India

posted in: Dairy Industry | 0

We all are aware of the term Foreign Direct Investment (FDI), after all it has been a part of almost ever industry around us!

However, FDI in the dairy and the agricultural industry has been controlled and limited to a great extent.

Let us particularly look at the Dairy industry in this blog;

Being one of the largest milk producers, we sure have foreign investors at the ready to unleash potential and gain profits!

But that’s not it!

  1. India has an advantage over other countries when it comes to cost of production, as well as geographical location.
  2. Most dairy farmers of our country have been into dairy farming inherently and lack an upper hand in technological advancement, keeping them from being able to unbridle the most out of their resources.

Indian Dairy Industry thus appear like a treasure island to foreign investors, to explore … or rather exploit!

Currently, all the produce of our country is consumed by itself, leaving negligible surplus to export.

Foreign investor promise to bring with them technology that can improve not only the quality but also the quantity of milk produced in the country. They also ensure expertise in production of processed milk products that can compete with international demand.

Then why has FDI still been debarred in the Indian Dairy Industry?

What seems to be the potential risks involved in sanctioning FDI in this industry?

The best way to assess this would be to observe other players of this industry, countries like UK and USA that rule the dairy industry globally.

When compared;

  1. The milk producers in the US get only 38% share of the consumer’s dollar spent on milk, while the rest is earned by the processor and retailer.
  2. In the United Kingdom, the milk producers get only 36%.
  3. Whereas, in India, the milk producer get more than 70% of the consumer’s rupee on an average. Moreover, the milk producer affiliated to co-operatives get more than 80% share of organized retail increases.
  4. In Indian cooperatives, farmers control cent percent of production, processing and most importantly marketing.

In conclusion, milk producers suffer when the share of organized retail increases, and integration with global retail chains, which operate across the world, will directly expose Indian consumers as well as Indian farmers to any future global turbulence.

Do we really need this?

Presently most of the dairy plants in the Government, Cooperatives and Private Sector of India produce similar dairy products like varieties of milk, butter, ghee, skimmed milk powder and whole milk powder. With some R&D and modern technology, these plants can be developed to produce value added products, being demanded by the importing countries.

Hence there exists an immense scope in this industry for current players, bypassing the need for FDI.