dna Special | Maharashtra cracks down on overcharging milk retailers

At least Rs53 lakh daily and Rs193.45 crore per year.

This is the amount that people in Mumbai and neighbouring areas have to shell out over and above the printed maximum retail price (MRP) for milk. And what is more shocking is that this rip-off has been going on for years.

Legally, charging over the MRP is an offence.

Senior officials from the legal metrology department, which has launched a major crackdown on the malpractice, said 70 lakh litres of milk is sold daily in greater Mumbai, of which around 60% (42 lakh litres) is packaged. In this, at least 26.5 lakh litres of milk comes from the major brands Mahananda, Warna, Gokul, Amul and Mother's Dairy. Most of the overcharging- at least Rs 2 per litre- takes place on these brands which dominate a large chunk of the Mumbai-Thane market. The multi-layered milk distribution system in Mumbai ensures that the normal commissions are divided between all stakeholders.

"At least Rs53 lakh per day is going into black money," noted Sanjay Pandey, controller, legal metrology organisation, Maharashtra, who has cracked the whip on errant retailers and those higher up in the milk distribution and retailing chain. He added that the amount would be much higher if based on a ballpark premise that almost all the 42 lakh litres packaged milk was sold above the MRP.

"None of these (sales) are on receipts," said Pandey. "There is no paper trail after the distributor. No retailer gives receipts to consumers and no retailer gets receipts from sub-retailers, who in turn get none from distributors," he noted, adding that the money generated on the sale of this 42 lakh litres was unaccounted. Pandey termed this overcharging as being "as good as extortion."

Retailers claim that they are forced to overcharge consumers due to lower margins offered by milk federations, and some justify this flagrant legal violation on grounds that this extra margin is charged to recoup refrigeration expenses.

"In 15 days, we have registered over 208 complaints and more are coming in," said Pandey. This is a marked rise from just around 80 complaints last year.

The LMO has formed a consultative committee of social activists and has threatened to compound offences for not less than Rs25,000. Based on the committee's suggestion, the department has asked the government to audit these milk federations.

"We are taking cognizance of these complaints and chasing the retailers, but the problem does not seem to end. The law is weak as it levies a fine of just Rs2,000. But, this time, we are not just fining them but are also sending them to court," said Pandey, adding that they written to licensing authorities like the Mumbai and Thane civic bodies and the FDA asking them to take action.

Pandey noted they were cracking down on all- retailers, distributors and even manufacturers and a court had issued summons to all directors of the Gokul co-operative milk federation.

However, milk retailers pointed out that the main culprits were wafer-thin commissions, which are as low as around Rs1 to 1.5 per litre, unlike those given to retailers in the FMCG sector, which are at a minimum of 10%.

"Our commissions need to be hiked," said a representative of the Akhil Maharashtra Dudh Vikreta Sangh, adding that though milk prices had almost doubled in five years, retailer margins had stagnated, forcing them to overcharge. For instance, retailers buy a litre of cow's milk of a popular brand at Rs37 while its MRP is Rs38, while the cost and MRP for buffalo milk marketed by the same brand is Rs47 and 48.

"Companies spend crores on ad campaigns while giving us a pittance. The milk retailing business was started by the educated unemployed. Even we are common people who need to run our families," he said. He added that instances of overcharging were few with other brands which gave good commissions to retailers.

Incidentally, rates at which dairies purchase cow's milk from farmers ranges from Rs 20 to Rs 24.50 per litre depending on the fat and solid not fat (SNF) content, while that for buffaloes milk is in the Rs29 to 33.50 range.

Retailers have threatened to boycott these major brands if their commissions were not hiked, and some have actually begun to do so.

DV Ghanekar, managing director of the Kolhapur-based Gokul co-operative milk federation, said the commission is based on the proportion of profits and the market conditions. He added that though they had provided for around Rs 3.30 per litre as commissions, these were diffused in the multi-layered retail chain.

Ghanekar termed the retailers' boycott of the brand as a "reaction to the government's action of conducting raids." This has led to a fall in the sales of Gokul in Mumbai from around 6.25 lakh litres to 5.25 lakh litres.


Consumers can complain to the legal metrology department on 22886666, via WhatsApp on 9869691666 or email to: dclmms_complaints@yahoo.in.