Pawar, while presenting the supplementary budget, talked about the Rs 5 per liter subsidy which would continue from July 1. “An amount of Rs 223.83 crore has been distributed as subsidy to 2.93 lakh registered milk producers at Rs 5 per litre. The remaining subsidy will also be disbursed immediately. I announce that the Rs 5 per liter subsidy will continue from July 2024 onwards to support milk producing farmers,” his speech read. The earlier subsidy was announced when farmers led by the All India Kisan Sabha – the farmers’ wing of CPI (M) – had protested against low realization of milk. The new production subsidy does not have an end date, but the dairies are waiting to read the fine print to see how this would be implemented.

Production subsidy is not new to Maharashtra – during the 2020 Covid-19 subsidy, the then Uddhav Thackeray-led government had announced a similar subsidy. The subsidy was linked to a certain procurement price to be paid by dairies. Subsidy was to be paid directly to the bank accounts of the dairy farmers.

So why was this announced now?

The first reason has to be the drubbing faced by the MahaYuti government in the Lok Sabha elections. In areas where dairy is a major side-business, the MahaYuti candidates have lost. Barring the Hatkanagale seat in Kolhapur district, where Dhairyasheel Mane, the Shiv Sena (Eknath Shinde) candidate managed to win, in all other seats the MahaYuti candidates contested were lost. Low milk procurement price – the price paid by dairies to their farmers – has been a sore point with the farmers.

At present, dairies in Maharashtra are paying their farmers Rs 24 to 26 for milk with 3.5 per cent fat and 8.5 per cent SNF (Solid Not Fat). The subsidy would push the procurement price to Rs 30-31 per liter – much less than the Rs 40 per liter that protesting farmers are asking for. On Tuesday, dairy development minister Radhakrishna Vikhe-Patil announced that the subsidy would be given over a base price of Rs 30 per litre. Also, Rs 30 kg subsidy would be given for conversion of excess milk into Skimmed Milk Powder (SMP).

Dairies point out that at present their realization would not allow them to buy milk over Rs 26-27 per litre. A dairy owner from Pune said 100 liters of milk (which equals to 102.5 kg of milk) would produce 3.598 kg of fat and 8.738 of SMP (considering 3.5 per cent fat and 8.5 per cent SNF). SMP realization at present is nearly Rs 210 per kg while yellow butter is trading at Rs 350 per kg. Thus gross realization for a dairy from processing 100 liters of milk would be Rs 3,371 (Rs 1,835 from SMP and Rs 1,536 from realized fat). Deducting Rs 7 per liter as processing and transportation cost, dairies would be able to pay Rs 26.71 per liter as the maximum price for milk.

“The production subsidy would help in increasing the realization of farmers,” pointed out the private dairy owner.

Will dairies be able to pay Rs 30 per liter as procurement price?

Most dairies have said they would not be in a position to pay the Rs 30 base price. Dairies point out that at present their realization would not allow them to buy milk over Rs 26-27 per litre. A dairy owner from Pune said 100 liters of milk (which equals to 102.5 kg of milk) would produce 3.598 kg of fat and 8.738 of SMP (considering 3.5 per cent fat and 8.5 per cent SNF). SMP realization at present is nearly Rs 210 per kg while yellow butter is trading at Rs 350 per kg. Thus, gross realization for a dairy from processing 100 liters of milk would be Rs 3,371 (Rs 1,835 from SMP and Rs 1,536 from realized fat). Deducting Rs 7 per liter as processing and transportation cost dairies would be able to pay Rs 26.71 per liter as the maximum price for milk.

What have the farmers said?

Ajit Newale, general secretary of the Kisan Sabha, has rejected outright the state government’s subsidy scheme. Newale said given the increased cost of production of milk, any price less than Rs 40 is not feasible for farmers. Newale said they would continue their agitation.

The drought in the state has seen farmers complain of increased price of green fodder as well as dry feed. The advent of monsoon has managed to ease out the water scarcity situation and in a month or two, the green fodder crisis would also be resolved. “However, at present farmers are in financial loss and without Rs 40 per liter as the base price – their financial liability would go on increasing,” he said.