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July 7, 2019

Milk shortage expected as retailers reject farmers’ increase in wholesale rate


July 7, 2019

Milk may become scarce in the markets of Karachi because of a decision of the dairy farmers’ associations to increase its price by Rs10 per litre, which the Milk Retailer Association has refused to accept fearing a crackdown by the Sindh government.

Currently, there are three associations of dairy farmers who supply milk to Karachi, namely the Karachi Dairy Farmer Association, the Dairy Farmer Association, and the Karachi Dairy and Cattle Farmers Association. They have jointly increased the wholesale rate of milk from Rs85 to Rs95 per litre, due to which the retail rate of milk has to be around Rs110 per litre as the retail price of milk is generally around 10 per cent more than its wholesale price.

The official retail rate of milk currently notified by the government is Rs94 per litre. However, according to Karachi Dairy and Cattle Farmers Association chairperson Shakir Umer, the official rate is being flouted in the city as milk is being sold at Rs100 per litre.

The wholesalers had also increased their rate in Ramazan, Umer said, adding that they, however, took their decision back at the request of the Karachi commissioner.

Haji Akhtar of the Dairy Farmers Association told The News that they had been doing the rounds of the Commissioner Office since the last six months to get a new wholesale rate for milk notified; however, no one listened to them. “Now it has become impossible for us to sell milk at old rates due to ever-increasing inflation,” he remarked.

The agreement

The wholesalers’ associations have written a letter to Karachi Commissioner Iftikhar Shallwani to remind him that the Commissioner Office, which regulates the price of milk, and the associations of milk sellers had formally agreed on revising the milk price after certain time period.

According to the agreement, the government was supposed to revise the price of fresh milk after every four months in accordance with the food inflation rate notified by the State Bank of Pakistan.

It was April 1, 2018, when the price for milk was officially notified the last time. As per the agreement, the price had to be revised on August 8, 2018, which was not done, the letter read.

According to the letter, the agreement had also been endorsed by the Sindh High Court in its March 3, 2018 order.

Prices of fodder

The prices of fodder, Akhtar said, had increased substantively. He said palm kennel cake, which the cows and buffaloes eat, used to be sold at Rs800 for a pack of 48 kilogrammes some time ago, and now it costed Rs1,400.

“If the government can notify milk rates, why doesn’t it cap the rates of cow fodder?” the Dairy Farmers Association’s representative asked.

Umer also spoke about the same issue of the increase in fodder price. He said the price of soybean, American Makai and other cow fodder that they imported had drastically increased due to the sharp increase in dollar rates. Retailers’ dilemma

Amjad Ali of the Milk Retailers Association said the retailers were in a dilemma after the wholesalers’ announcement of the increase in their rates.

“If we increase the price of milk, the government will start crackdown against us. If we don’t, we will be in losses,” he said, adding that they had no choice but to go on strike.

The commissioner, he lamented, only caught retailers and did not hold farmers responsible for increasing the wholesale rate.

Ali alleged that milk was being sold in Lea Market at Rs140 per litre due to the farmers’ monopoly but no action was taken against them.

Explaining the business model of the retailers, he said all the retailers were under a verbal agreement with the farmers, according to which, they got a certain amount milk for a year. “For an additional milk that we need usually in the summer to sell Lassi, we have to approach the open market,” he said and asked why the government had been ignoring the farmers’ monopoly.

Ali said had the commissioner met the farmers’ associations and increased the wholesale price of milk by Rs5 per litre, the retail price of milk would have been capped at Rs100 per litre.

Conflicting calculations

According to Umer, when milked, their one animal produced eight litres of milk on average. He said the average cost for a single milking process was Rs469.5 per litre.

The total cost incurred by the farmers, Umer said, included the animals’ depreciation cost, the fodder cost and the management cost that included various heads including labour, rent, medicines, vaccination and others.

If this cost is divided by eight, he said, the cost of the production of one litre of milk would not be less than Rs116.49. He demanded that the wholesale price of one litre of milk be increased to Rs125 as they had been incurring losses in their business.

However, the wholesalers’ calculation is quite different than the calculation of the Commissioner Office. Sharing the latter’s calculation, Ali said the total cost incurred by farmers to produce one litre of milk was Rs90.89, which was rejected by Umer who said the calculation was incorrect as it did not take into account all the expenses of the farmers.

Crackdown ordered

The Karachi commissioner taking notice of media reports about an increase in the milk price in Karachi directed all the deputy commissioners (DCs) and assistant commissioners (ACs) to take strict action against the milk sellers who were violating the notified rates.

According to a statement issued from the Commissioner Office, Shallwani directed the DCs and ACs to impose heavy fines on retailers flouting the official rate and send them to jail.

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