The Central Dairy Cooperatives Association has issued an ultimatum to the government, stating that it would launch a protest if dairy farmers are not paid their outstanding dues by dairy companies within the next two weeks.

Amar Bahadur Kunwar, president of the association, said that despite an agreement signed between the government and dairy cooperatives to settle the farmers' dues, the cooperatives, especially those associated with private dairy companies, have breached the agreement, causing the problem.

Private and state-owned dairies owe around Rs5 billion to farmers, said Kunwar.

On March 4, three private dairy associations—Central Dairy Cooperatives Association, Nepal Dairy Association, and Dairy Industry Association—the state-owned Dairy Development Corporation, and the Ministry of Agriculture and Livestock Development, had signed a trilateral agreement to pay farmers their dues.

There, however, were no single representatives of the farmers during the signing of the agreement.

Under the agreement, farmers who have not received payments since August last year were to receive a payment for six months or until mid-January by April 3.

“The agreement was a lie,” said Kunwar.

"We have on Monday, notified in advance to the Dairy Development Board, Dairy Development Corporation, Nepal Dairy Association, Nepal Dairy Industry Association, Agriculture Ministry, Prime Minister’s Office and Finance Ministry about our protest plan and its consequences,” said Kunwar.

“We have given a 15-day ultimatum to clear the payment, or else we will launch a stern protest.”

Surya Prasad Paudel, general manager of the Dairy Development Corporation, said, “We borrowed Rs300 million in credit from the government and cleared the farmers due till December last year. We still owe more than Rs1 billion to dairy farmers since January.”

In February, the corporation sought a bailout fund amounting to Rs300 million from the Finance Ministry. Subsequently, in March, the government decided to provide the credit.

The corporation said the stock of butter and powdered milk has piled up due to low demand in the market, and as a result, the cash flow has stopped.

Despite the summer heat, the demand for dairy products has not improved.

The corporation has also issued a tender for the sale of butter and powdered milk. “Let's see how much we can sell,” Paudel said.

Despite the summer season, the demand for dairy products has not fully picked up.

“The low demand will not help us generate the income needed to pay the farmers,” Paudel said.

Market insiders say that the Dahal-led government, without conducting proper studies, hiked the price of milk for two consecutive years to encourage farmers to produce milk.

They said the consumer price of dairy products has become too high, as people's incomes have not improved, resulting in a slowdown in sales.

On March 3 last year, the government hiked the minimum purchase price of raw milk paid to farmers by Rs9.1 per litre to Rs65.5. Later in the same month, the DDC increased the price of half-litre of standard milk that comes in a blue packet by Rs5.50 to Rs48.50.

Demand for dairy products started falling as soon as the prices were hiked.

“People's incomes have dropped. They cannot afford to buy a litre of milk that costs over Rs100. The curd price has jumped to Rs200 per litre, and the prices of other dairy products have also increased," said Madhav Timalsina, president of the Consumer Investigation Forum. “An unfair price on dairy products benefits neither consumers nor farmers.”

Both state-owned and private dairies have been saying that the ongoing economic slowdown has dampened dairy demand, resulting in stopped cash flow and rising liabilities to farmers as products remained unsold for months.

The corporation is yet to finalise the strategies regarding clearing the remaining dues, Paudel said.

Kunwar of the Central Dairy Cooperative Association said that the association does not make the payment, but it facilitates settling the payment from the dairy industry and other problems. The association does not know why the dairy industry is not able to settle the payment as per the agreement.

According to Peasants' Coalition Nepal, the association of dairy farmers, farmers in eastern Tarai are facing even greater hardships as it has been nearly a year since they received any payments. The farmers of Jhapa and Biratnagar [Morang] have not received their payments for months. The farmers of Chitwan are also struggling.