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Informist, Thursday, Oct. 3, 2024

 

NEW DELHI – The government can lower the import duty on skimmed milk and butter in order to bring down the retail prices of milk, a Reserve Bank of India working paper said Thursday. The current import duty on skimmed milk powder and butter is 60% and 40%, respectively.

 

"Rationalising the import policy regime through timely calibration of tariffs and duties could be a short-term measure to stabilise inflation in milk," the paper said, which is part of a joint research project between the Indian central bank and the Indian Council for Research on International Economic Relations. The paper proposes policy measures to improve the dairy and poultry value chain in India with the aim of stabilising inflation in the livestock sector while promoting the sector’s growth over the medium to long-term.

 

"From a policy perspective, accurate forecasting of livestock and poultry inflation holds importance, especially as food inflation often drives headline inflation significantly in India," the paper said. Food inflation has kept the headline inflation from coming down to the RBI's medium-term target of 4%. While headline inflation has averaged 4.6% in 2024, food inflation has been much higher at 7.9%. Milk and products inflation has averaged 3.3% this calendar year.

 

 The views in the paper are only of the authors and not of the RBI or the New-Delhi based think-tank. The authors of the paper are from ICRIER and include agriculture economist Ashok Gulati as well as officials from the RBI’s Department of Statistics and Information Management, Department of Economic and Policy Research, and the Monetary Policy Department.

 

Lower import duties on skimmed milk power and butter can help reduce the price pressures on milk at the retail level by augmenting milk supply during the lean season, the paper titled 'Livestock and Poultry Inflation in India: A Study of Milk, Poultry Meat and Eggs' said. "However, the reduction in import duties may be calibrated such that they do not harm price realisation of domestic dairy farmers."

The government can allow the National Dairy Development Board and major cooperatives to import milk fat and skimmed milk power as a short-term measure to build the buffer stock necessary for the lean season, if needed, the paper said. The government can also bring skimmed milk power and butter under an open general license scheme and imports may be released in a calibrated manner to meet demand, "without significantly impacting procurement prices paid to dairy farmers", the paper said.
 

The paper also suggested policy measures to keep poultry inflation in check. Eggs inflation was 7.14% in August, as against headline inflation of 3.65%, while chicken inflation was 2.2%.

 

The government can lower the basic customs duty on cut pieces of chicken from the current 100% to meet the seasonal demand and contain meat inflation in the short run, the paper said. Government policy should also prioritise increasing the production of maize and soyabean, which make up 95% of the total feed cost, to make quality feed available at affordable prices, the paper said. "Feed cost constitutes the major cost of production in the poultry sector. Maize and soybean constitute 95 per cent of total feed cost, and hence their prices have a direct bearing on the cost of production."  End

 

Reported by Shubham Rana

Edited by Vidhi Verma

 

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