Sri Lanka, a country with a 21.5 million population (less than Tamil Nadu’s 80 million and Kerala’s 34 million), imported dairy products valued at $333.8 million in 2020 and $317.7 million in 2021. The island nation’s imports of whole milk powder (WMP) alone were 89,000 tonnes and 72,000 tonnes in these two years. The powder imported in 2020 would have “produced” almost 2.1 million litres per day (MLPD) equivalent to milk. This is as against the 1.3 MLPD that Sri Lanka produces from its own cows and buffaloes. It translates into an import dependence of over 60 per cent — for a country having very little foreign exchange today to import anything, leave alone milk powder.
At the other end, we have Saudi Arabia, home to over 35 million inhabitants (including immigrants) and also the world’s largest vertically integrated dairy company. Almarai Company has six dairy farms in the desert kingdom that together house some 1,07,000 Holstein Friesian cows producing more than 3.5 MLPD of milk. The animals are sourced from the US and Europe. The entire feed (about 1.5 million tonnes per year of corn, soyabean meal, cottonseed oilcake and other ingredients) and also forage given to them are procured from abroad. The company has even purchased thousands of acres of land in California, Argentina and Romania to grow alfalfa hay, which is then shipped back for feeding the cattle.
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The answer is food security. The Saudis — other Persian Gulf countries have also copied the Almarai model — are prepared to pay any price when it comes to ensuring the availability of basic food like milk. This, despite not having the land, water or climate required for green fodder cultivation — unlike Sri Lanka that has all the natural resources to become a dairy superpower. There is a Tamil saying: “Kaile vennai, anaal neyyukku alayaran (the person with butter in his hand is searching for ghee)”. Sri Lanka allowed the butter to slip through its fingers.
There are lessons here for India, which is hugely import-dependent in edible oils, just as Sri Lanka has been in dairy. India annually imports 13.5-14.5 million tonnes of vegetable oils, again roughly 60 per cent of its total consumption. Till recently, this didn’t seem to matter. Low international prices meant that the import bill, though high, fell from $9.85 billion in 2012-13 to $9.67 billion in 2019-20. Indian consumers paid more or less the same for imported palm, soyabean and sunflower oil in 2019 as they did in 2012.
But the story has changed in the last couple of years, with retail prices of most oils doubling or more. The value of India’s vegetable oil imports surged to a record $19 billion in 2021-22. It has brought to light the perils of over-dependence on imports of essential food commodities.
As a country with a population many times that of Sri Lanka and Saudi Arabia, India needs to have a strategy of self-reliance in basic foods. Only two years ago, India was under pressure to join the Regional Comprehensive Economic Partnership free trade agreement (FTA) and open up its dairy products market to unfettered imports.
In November 2020, when the deal was signed, international skim milk powder and anhydrous butter-fat prices were at $2,700-2,800 and $4,000-4,200 per tonne, respectively. But the government decided to opt-out of the agreement, perhaps realising the damage that a previous FTA with the Association of Southeast Asian Nations (ASEAN) had done to India’s edible oil sector.
Today, when powder and fat prices are at over $4,100 and $6,000 per tonne — they have even crossed $4,600-7,100 levels — the wisdom of that decision has been borne out. Indian consumers haven’t experienced much inflation in milk products. If India had become a dairy products importer, like in edible oils, the prices wouldn’t have stopped at $10,000 per tonne. The entire global dairy trade is less than a quarter of India’s annual milk production. The world cannot supply us even if it wants to.
In milk, and in most foods, only we can feed ourselves.
(The writer is chairman of the Chennai-based Hatsun Agro Product Ltd)
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