Dairy farmers upset by GST 2022 ruling

Dairy farmers are upset about the change in the Goods and Services Tax (GST) rates.

Dairy farmers are upset with the Goods and Services Tax (GST) change because the government has increased the GST levied on dairy products. The GST rate has been reduced from 5%. Along with this, GST rates are also increased on machinery used in the dairy industry.

It has become a matter of concern for dairy producers. Due to this measure taken by the government, a kind of crisis will be observed in the dairy industry. It is expected that Uttar Pradesh will soon catch up on the concern over this GST rate change, a step taken by the government as Uttar Pradesh is one of the largest milk producing states in India.

The cost of curd, lassi, butter, milk and breading is increased following the decision of the GST Board to remove the exemption granted to these products. It removed the exemption on pre-packaged and pre-labeled retail packages on items such as curds, lassi and buttermilk.

KMF, the largest milk and dairy operator in the state of Karnataka, would raise the cost of curd by Rs 2.2 per liter, lassi and buttermilk by Rs 3.75 per liter and Rs 3 per liter , respectively. A formal request to reverse the decision is expected through a memorandum to the government.

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According to initial calculations, after the tariffs were announced on Wednesday, the federation expects to pay around 22 lakh per day as GST on its total sales of curd, lassi, buttermilk and paneer. The union is awaiting notification for a clearer picture. Dairy and milking machines will now be subject to the 18% GST bracket, and tetra pack paper laminates will also be taxed at 18% GST.

India is one of the largest milk producers in the world, accounting for over 22.0% of global production and 57% of Asia’s total milk production. Milk production in India increased from 17 million tons in 1951 to 187.7 million tons in 2018-2019. Milk is the only agricultural product of which around 70-80% of the final market value is shared with farmers.

Why India's dairy giants fear disruption from New Zealand businesses - Times of IndiaIt accounts for about a third of sovereign household income in India. It improves livelihoods, creates jobs, supports agricultural industrialization and commercialization, and improves nutrition for the masses.

Some challenges are related to the dairy sector. Let us analyze these challenges associated with the Indian dairy sector;

Opportunities

The critical opportunities associated with the Indian dairy sector are:

1. Now people have a preference for a healthy lifestyle

Due to an increase in the trend of lifestyle decisions, especially in developing countries like India, people are preferring to adopt a healthier lifestyle. For example, later, people used to choose coca-cola drinks, but now, as the new trend of healthy lifestyle is increasing, people are changing their preference from coca-cola to milk.

dairy industry a catalyst to boost india's agricultural economy - samarth setia - bw businessworld

The preference for a healthy lifestyle gives this dairy sector a huge opportunity for growth. This sector also offers vast opportunities for business growth.

2. Business Growth Opportunity

This business opportunity is not only in milk but also in dairy products. This means that the food processing product related to milk will have a huge opportunity. It creates self-employment and salaried jobs.

3. Interest of multinationals for the dairy sector

Many Multinational Enterprises (MNEs) are showing interest in investing in the Indian economy in the dairy sector. Not only multinationals, but also Indian companies. This implies that large scale investment opportunities are available in this dairy sector. And this large-scale investment will lead to improved technology, capital and infrastructure in this sector. This will also contribute to the creation of more jobs in this sector and will have a long term impact on the Indian economy.

Challenges for the dairy sector

Even though the Indian dairy sector offers huge opportunities, there are also specific challenges in this sector. If we are to use this blow from this sector, the difficulties of the dairy must be carefully dealt with.

1. Just a subsistence activity

In developed countries like the United States, large dairy farms are engaged in milk production. But when it comes to developing countries like India, cattle rearing or dairy farming is a livelihood activity for farmers.

This means that from these large farms, the yield or production is very high, but in the case of India, the yield per unit is significantly lower. Here we must understand that when the production or volume is very high, it will increase the efficiency. So in the case of developed countries, there is more efficiency, and the sector is more organized than in India. Thus, the dairy sector in India is organized and unit efficiency is very low.

2. No more unorganized channels

Only 20 percent of the total production is sent to organized marketing. This means that only 20% of what is produced in the economy is channeled into organized means. Thus, approximately 80% of total production is routed through unorganized supply chains.

Studies have shown that this will lead to supply chain constraints and serious health issues related to timing, transportation and impurity.

According to the Food Safety and Legal Authority of India (FSSAI) survey of 2012, it is found that about 70% of urban supply and about 38% of rural supply are substandard.

Corrective actions

1. Supply chain reassessment

The first thing to do to correct the challenges is a reassessment of the supply chain, as we have seen that most dairy is in the unorganized sector. Measures must therefore be taken to formalize this sector in order to integrate them into a properly organized network. .

2. Modernized logistics

We have already mentioned that the measurement problem in agriculture and dairy is the faulty supply chain. It is therefore essential that we modernize milk logistics, including storage, transport, delivery, etc.

3. Concentrate right from the begging

The focus should be on the beginning of the supply chain, from producers to consumers in the chain. On the producer’s side, priority should be given to managing and raising livestock and providing the right livestock.

eco milk production infographic in flat style.  cow farm, transport and processing in a milk factory, distribution of fresh and healthy dairy products in retail.  milk making svg vector illustration, clipart, vectors,

For this training to be provided to the producers, proper health checks must be provided, certain technologies must be introduced and financial assistance must also be provided; All of this will help boost production from a grower’s perspective, and growers will be more motivated. This will also ensure that production is going in the right direction.

4. Processing infrastructure and cold chain

We can understand this through an instance. During the operation, massive upgrades were made in this sector. Likewise, more initiatives should be taken. Therefore, the fact is that we need quality-conscious technology to eliminate the bottleneck in the supply chain.

5. Transportation

As we all know, milk is a highly perishable commodity. Traveling beyond 200 km to distribute milk is not at all possible. A geographical distribution of supply and processing sites is therefore necessary.

If these corrective measures were properly initiated, they would lead to profitable growth for the dairy sector and help increase its efficiency.

Edited by Prakriti Arora