The Cabinet on Thursday approved the government’s plan to export milk to India for three months.

For the first time, Nepal will be exporting 30,000 litres of milk to the southern neighbour every day. The move is aimed at averting a possible “milk holiday”.

For this, the Finance Ministry has allocated Rs16.09 million subsidy to facilitate exports. As Nepali milk is expensive by Rs5.96 per litre compared to the Indian product, the Dairy Development Corporation (DDC) will sell the milk at the Indian rate.

“The loss incurred by the DDC will be compensated by the subsidy,” said Uday Chandra Thakur, spokesperson for the Ministry of Agricultural Development. “It, however, will not affect the prices that DDC pays to milk producers.” After the DDC receives a formal Cabinet decision, it will sign an agreement with India’s Patna Dairy to export the surplus milk, Thakur said.

Amid arguments that reducing Rs6 on a litre of milk in the domestic market would increase consumption here, Thakur said the decision to export milk was based on experts’ recommendation. He said due to low domestic demand during the flush season, chances of “milk holiday” were high. “As an immediate measure to prevent the problem, we decided to export surplus milk for a temporary period.”

Except for a few instances, the country has not faced a milk holiday since 2006 after the entry of a number of private dairies. There are two extreme seasons for milk production—flush and lean. Flush season usually runs from August to February which sees excessive supply and rest of the months are considered lean season.

The ratio of lean-to-flush season production is about 1:3 in Nepal. Seasonal breeding pattern of buffaloes and availability of green forages in monsoon season are the main reasons for such an inconsistent production.

The market does not determine the milk price in Nepal. As the government sets the prices, the prices do not go down even in the flush season. Fearing protests from the farmers, milk prices are not revised downward.

Experts said dairy farming in Nepal is dominated by non-commercial farmers, so the production cost of milk is generally higher than in neighbouring India.

Dairies said they have stopped buying milk amid a slowdown in sales after the April 25 earthquake. Large quantities of powder milk and milk-related products like butter and ghee remained unsold since the last few months due to reduced demand and Nepali dairies’ inability to compete with imported products.

The DDC had even urged the government to stop imports for at 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.

The government has raised customs duty on ghee- and milk-related products to 20 percent from 15 percent. The Agriculture Ministry has also proposed the government to hike the duty further.