Punjab: Staring at Rs 280 crore loss, Milkfed seeks relief to stabilise system

CHANDIGARH: The Punjab State Cooperative Milk Producers’ Federation Limited, popularly known as Milkfed, has asked for at least Rs 250 crore relief package for stablising the system hit due to Covid-19 crisis . Milkfed also plans to increase its milk procurement and processing capacity, and to ultimately provide relief to milk producers.

Milkfed, which markets its products through its flagship brand Verka, is likely to incur an overall loss of Rs 280 crore. This includes Rs 185 crore due to the current crisis situation, Rs 70 crore because of additional milk handling, and Rs 25 crore per annum additional carrying cost of the commodities in stock.

Milkfed’s managing director (MD) Kamaldeep Singh Sangha told TOI that the Milkfed had to borrow an additional amount of Rs 250 crore during the Covid-19 lockdown period for enhanced working capital requirements and to pay remunerative prices to the farmers even in adverse conditions.

“We have asked the state government to lend us support in interest subvention for the loans taken from various banks so as to keep the system afloat, as we have incurred extra burden because of the pile up of stocks which are likely to remain with us for long due to no extra demand,” said Sangha. He added that the interest subvention will ensure that milk producers’ supply did not get affected and the long term system of the Milkfed did not fail.
In a detailed report prepared by a committee of the cooperative department, it has also been urged that extra liberal support is needed to strengthen and expand the Milkfed infrastructure to meet extra burden of the milk production in the state and to double the processing capacity in the long run.

“We have also suggested that the skimmed milk powder (SMP) can be distributed to the government schoolchildren in the mid-day meals. Similarly, the milk powder can also be distributed through the public distribution system (PDS) to the kids of poor strata of the society to fulfil their nutritional requirements,” said the Milkfed MD.

Adding to Milkfed’s financial crisis, the prices of commodities have decreased up to Rs 100 per kg for milk powder. Though the international giant Nestle has reduced its milk procurement during the Covid-19 crisis but on the contrary, the Milkfed has increased its milk procurement capacity.

Punjab produces around 105 lakh litres of milk per day. Though the production of milk decreases during the summers but the Milkfed is looking at handling the increased milk supply from October onwards. The state government had proposed to come up a with one big Verka milk plant in Bassi Pathana by this year-end but the project might delay. Similarly, the Creambell ice cream company also has plans to come up with a big plant in Pathankot which would increase milk demand in Punjab.

Milkfed’s lockdown crisis
There are 10 state government owned Verka milk plants in Punjab with around 27 lakh litres per day handling capacity, besides 30 big and small plants owned by private players

As milk producers in the unorganised sector suffered a huge setback during the Covid-19 lockdown starting from March 23 because of the closure of hotels, marriage places, dhabas, sweet shops and other eateries, Milkfed had to increase its procurement capacity
Milkfed’s milk procurement increased by 26% from 19 lakh litres per day to 24 lakh litres per day. As there was a simultaneous decrease in liquid milk utilisation by 25%, Milkfed had to convert 7.4 lakh litres more milk per day into skimmed milk powder and white butter. Therefore, the Milkfed has already accumulated 10,500 metric tonnes of skimmed milk powder and 7,000 metric tonnes of white butter. Additional items are worth Rs 220 crore

During the lockdown period from March 23 to May 23, the Milkfed procured a total of 1,448 lakh litres of milk amounting to Rs 501 crore. The average price paid by Milkfed during lockdown period from March 23 to April 30 was Rs 3.79 per kg higher as compared to the same period last year. From May 1 onwards, Milkfed is paying Rs 2.16 per kg higher than the same period of last year despite huge increase in milk procurement.