The Ministry of Agriculture Development has requested the Finance Ministry to provide a subsidy of Rs16.09 million to facilitate exports of surplus milk to India. Due to low domestic demand, Nepal sees a surplus milk of 30,000 litres each day.

As dairy producers had been told to use the surplus milk to produce ghee and other dairy products, they now have a massive stock of ghee and powdered milk. Worried, the dairies have stopped buying milk amid a slowdown in sales after the April 25 earthquake.

As cheaper imports from India has made Nepali products uncompetitive (Nepali milk is expensive by Rs5.96 per litre compared to Indian product), the farmers have been demanding subsidy to export their produce to prevent a milk holiday.

The Dairy Development Board had even urged the government to stop imports of dairy products for at least six months. According to the Nepal Dairy Association, privately-owned dairies have 1,200 tonnes of powdered milk and 1,400 tonnes of butter in stock.

Amid concerns the imported products have been hurting the domestic market, the government has raised customs duty on ghee- and milk-related products to 20 percent from 15 percent. Traders said Nepali ghee could not compete with Indian ghee like Patanjali that are available at cheaper rates.

“As the increased custom duty is not sufficient to discourage imports, we have requested the Finance Ministry to farther increase the duty on powdered milk imports and make customs valuation as per the changing contexts,” said Uttam Kumar Bhattarai, secretary at the agriculture ministry. “Besides, we have requested the Finance Ministry to provide 90 percent VAT exemption on milk products.”  

However, consumer rights activists and private dairies have been demanding lowering the prices of dairy products to promote consumption during the flush season. “The government itself has created the situation of milk holiday. The state-owned Dairy Development Corporation’s decision to increase the price of milk by Rs8 per litre was wrong as the international prices were falling then,” said Prem Lal Maharjan, president of National Consumer Forum.

Pradeep Maharjan, president of Dairy Industries Nepal, said the problem of milk

holiday would be solved if the government introduced seasonal pricing mechanism.

“The main problem is the milk price is high in Nepal compared to any other country this time. This is the reason that our other products like ghee and powdered milk are not competitive,” he said.

He said the government should slash the prices during the peak season, which ultimately increases consumption and also protect domestic industries. The country’s largest powdered milk plant, Chitwan Milk, has been closed as it has not been able to compete with imported products.