New Delhi, Feb. 20 With the European Union (EU) announcing a second round of export subsidies on dairy products, pressure is mounting on the Centre to raise import duties on butter oil and skimmed milk powder (SMP).
The sharp decline in international prices has already led to imported butter oil arriving in the country. So far, around 3,000 tonnes have contracted, mainly by northern dairies including Sterling Agro Industries (maker of ‘Nova’ ghee), Karnal Milk Foods (‘Karan’), and Mahaan Foods Ltd (‘Mahaan’).
“Out of the 3,000 tonnes, 800-odd has already landed and been converted into ghee for domestic market. The butter oil is mainly of New Zealand origin and contracted at $1,650-1,700 a tonne, cost and freight, which is hardly Rs 85 a kg”, industry sources said.
This is much below the Rs 175 a kg at which ghee is currently wholesaling in Delhi. Butter oil imports attract 35.2 per cent duty, including a basic rate of 30 per cent and a special additional customs duty of 4 per cent (computed on 130).
“Even after adding duties and processing costs, the imported product would sell much cheaper”, the sources said. Both ghee and butter oil are prepared by melting butter – the former at below 80 degrees celsius and the latter at 100-140 degrees. Butter oil processing involves additional melting and bleaching in order to remove its yellow colour.
Farmers hurt
“We, along with other dairy cooperatives, are planning to meet the Prime Minister to stop imports that can harm our farmers”, said Mr B.M. Vyas, Managing Director, Gujarat Cooperative Milk Marketing Federation (GCMMF).
The issue also figured in the Rajya Sabha on Thursday, with the Akali Dal Member, Mr Naresh Gujral, alleging “dumping” of subsidised butter oil from the European Union and New Zealand, while demanding an immediate increase in the import duty to 100 per cent.
The Managing Director of Sterling Agro Industries, Mr Kuldeep Saluja, however, dismissed fears of large-scale imports. “With the prospect of a duty increase and also the weakening of the rupee, no company would really risk imports now”, he said.
Mr Saluja further claimed that his company had exported 4,000 tonnes of butter oil during 2007-08 at a price of $ 3,600 a tonne. “What is wrong if I import 1,000 tonnes at $ 1,700 a tonne today when milk fat is in short supply, just as I exported when we had a surplus?”, he quipped.
The Centre had, on April 29, reduced the basic customs duty on butter oil imports from 40 to 30 per cent, while also lowering that on SMP from 15 to 5 per cent. At that point, both butter oil as well as SMP prices ruled at over $4,000 a tonne, which has since dipped well below $2,000 levels.
EU norms
The situation has been made worse by the sharp depreciation of the New Zealand dollar along with the reactivation of export subsidies by the EU. After suspended these since June 2007, the European Commission, on January 22, fixed per tonne base export refunds of €170 on SMP, €544.9 on butter oil, €260 on whole milk powder (WMP), €450 on butter and €198.4 on cheese.
On Thursday, these were hiked further to €190 on SMP, €666 on butter oil, €290 on WMP and €550 on butter, while being retained at €198.4 for cheese.
Source : Business Line