From July 16, Bengaluru Milk Union Ltd. (BAMUL) reduced the procurement price by ₹2.5 a litre. Over two earlier rounds, it had reduced the price by another ₹2.5 a litre. Now, the farmer gets ₹24 a litre, down from the pre-COVID-19 lockdown high of ₹29. Similarly, it is learnt that district unions in Hassan, Shivamogga, Dharwad, and Mandya have also slashed the procurement price, all to around ₹24 a litre.

“We have a huge stock of skimmed milk powder (SMP) and butter lying around with us as the market has to improve. We also have to make fortnightly payments to farmers. BAMUL has already exhausted ₹80 crore of the ₹100-crore loan taken for the working capital on the stock. There is no other alternative,” BAMUL president Narasimhamurthy told The Hindu. “While we are unable to market the products made out of excess milk, the union has seen a spike in milk collection. The cost of SMP production has also gone up while the sale price has dropped.”

The trouble for BAMUL, which is among the largest milk unions in the State, is that its daily procurement of milk has gone up from 14 lakh litres to 19 lakh litres now, while the sale has reduced from about 11 lakh litres to 8 lakh litres. With the demand for products such as SMP, butter, ghee, and cheese nosediving, the union is facing a cash crunch.

Stories across other milk unions are similar. Sources said that across the State, of the about 90 lakh litres of milk procured, just about 40 lakh litres is being sold as milk; the rest is being converted into SMP.

Mr. Narasimhamurthy acknowledged that the cut in procurement price would hurt farmers, as ₹24 is far lower than the scientific price worked out to be in the range of ₹35 to ₹37 per litre. “Because the family turns up as labour, fodder is available in plenty, and there is no rent on cattle sheds, farmers can sustain. Once the market improves, unions will definitely go back to the original price,” he said.

Milk unions want govt. to hike incentive

While cash-starved milk unions are resorting to cuts in procurement price for milk, they have also sought the government’s intervention to bail out farmers by increasing the incentive from its side from ₹5 to ₹8 a litre. “Most unions have written to KMF about the hike in incentive, and BAMUL has also written to the government. The issue was also raised during a videoconference last week,” Mr. Narasimhamurthy said.

The unions have also suggested that the government supply skimmed milk powder through the Public Distribution System to homes of schoolchildren, who would otherwise get to drink milk daily, he added.

However, it may be noted that the government is yet to release the incentive for the last several months.