Government to raise Aarey milk price to beat reselling

Are consumers in Mumbai being sold repackaged milk from government milk distribution scheme at a higher rate?

The state government is planning to hike the prices of milk sold in the scheme to bring it at par with rates charged by other market players. The government move follows the suspicion that the price differential may be leading to the low-priced Aarey milk being repackaged and resold at higher rates.

"While we supply milk at lower rates when the market prices are higher, we are not sure if it is reaching the customers ... Low price sale should serve its purpose," said a senior official from the state dairy development department. He said most times milk was not available at Aarey stalls.

"Despite the lower price, why are there no agitation by the poor and lower middle class demanding Aarey milk? Repackaging needs around 60-80 paise per litre. The milk can also be sold loose for higher prices," he added.

There was demand for Aarey milk from religious groups during festive seasons like Ramzan. The milk was also supplied to government institutions like hospitals.

He said a litre of cow's milk was sold by Aarey at Rs 35 in Mumbai, compared to around Rs 40-42 by other brands.

However, the official said they planned to retain the low MRP for hinterlands and use the higher margin from a high-end market like Mumbai to cross-subsidise other regions.

Already, a litre of cow's milk is sold by Aarey at Rs 34 in areas outside Mumbai and buffalo milk is priced at Rs 44 in the city – the rate is lower by a rupee outside.

"We plan to earn more from high-end markets for the benefit of those who cannot afford milk due to their low purchasing power. This will be a cross-subsidy for such users," he added. The premium could also be used to ensure a better rate for dairy farmers.

The state government's milk schemes have a minuscule share in the greater market ecosystem, accounting for just around 80,000-90,000 litres of daily milk collection against about 1 crore litres of daily production of milk in Maharashtra. Much of this milk is sold in the Greater Mumbai market, which has a daily demand of 55-60 lakh litres.

Around 60% of milk in Maharashtra is collected from the organised sector, with the private sector accounting for the largest chunk followed by cooperatives. This figure does not take into account the milk brought into Maharashtra from neighbouring states.

However, the government's role in the market goes much beyond its smaller market share. It intervenes in the market, especially in times of a glut, which forces producers to discard their milk or when there is a shortage.

The average per capita availability of milk in Maharashtra was just around 223 grams per day in 2014-15 compared to the national average of 307 grams with food habits in the state not conducive to consumption of milk in the pure form due to reliance on other substitutes like non-vegetarian food to meet protein requirements.

Maharashtra ranks seventh in the country in milk production.