Consider these two extremes. Sri Lanka, a country with 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) were alone 89,000 tonnes and 72,000 tonnes in these two years.
One kg of WMP, when reconstituted by adding water, can make nearly 8.5 liters of toned milk with 3 per cent fat and 8.5 per cent solids-not-fat content. The 89,000 tonnes of powder imported in 2020 would have, thus, “produced” almost 2.1 million liters per day (MLPD) equivalent of 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 107,000 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, soybean 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.
Look at the contrast between the two models: One country importing WMP and adding water. The other producing all its milk domestically, although the animals, feed, fodder and even the technicians manning the dairy farms are wholly imported.
Best of Express Premium
Why is Saudi Arabia taking such pains to produce its own milk from cows, kept in sheds with overhead misters for spraying water droplets and fans to protect them from 50 degrees Celsius desert temperatures?
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 availability of a 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 instead of a super importer. 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 it had 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 that 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. India may not be facing a forex crisis like Sri Lanka, preventing it from importing even at high global prices. But that isn’t a consolation to Indian consumers having to buy at these prices. They had taken low edible oil prices for granted — just as the Sri Lankans had for milk “produced” from imported powder.
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. There was a lot of enthusiasm among user industries, which believed the RCEP would give them access to cheap imported ingredients.
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 realizing 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 had even crossed $4,600-7,100 levels — the wisdom of that decision has been borne out. Even as the era of cheap cooking oil is over, 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