Private dairies have requested subsidised loans from the government to settle farmers' dues, amounting to nearly Rs3 billion, amid the ongoing dairy sector slump.

They have also requested the government to permit them to export dairy products such as powdered milk, butter, and cheese, as consumption within the country has remained subdued. As a result, the stock has been piling up.

Recently, the government partially bailed out the state-owned Dairy Development Corporation by providing Rs300 million in soft loans. After dairy farmers started protests, officials privy to the matter told the Post that the government is preparing to release another Rs600 million to the corporation.

The corporation had in February said that the dairy industry was suffering from a recession and hoped that sales would increase in summer. But it didn’t.

Both state-owned and private dairy companies said 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.

“We are unable to pay farmers due to unsold products. The stock, too, is huge,” said Prahlad Dahal, president of the Nepal Dairy Association.

“So we have requested the Ministry of Agriculture and Livestock Development to provide a soft loan keeping our dairy products as collateral. We have also requested the government to open up exports so that we can sell our products and become able to pay the farmers.”

The association is scheduled to meet the agriculture minister on Monday. “We hope that our request will be heeded,” said Dahal.

The association has requested a soft loan for more than 50 percent of its remaining stock. Private dairies have stocks of powdered milk and butter worth Rs5 billion, said Dahal.

According to the association, the committee formed by the agriculture ministry to study the payment issues of dairy farmers found that around Rs4.50 billion is due to be paid by dairies to the farmers. The amount was previously Rs7 billion.

This shows that payment is being made gradually, Dahal said. “But that is not sufficient.”

Consumer demand for milk and other dairy-related products declined last year, with the government hiking the price of raw milk to benefit and encourage more dairy farmers to join the sector. However, the unscientific hike hit demand amid the people's declining incomes due to the economic slowdown.

Regarding price reduction to increase consumption, Dahal said private diaries have a high cost of production, so it will not be possible to reduce the price.

The government also imposes VAT on dairy products like ghee, ice cream, and cheese. “If the VAT is waived, prices will come down, which can boost the sales,” said Dahal.

According to the association, nearly 1 million litres of milk comes from the formal sector, which implies a daily transaction of Rs70 million.

“If the soft loan is provided and export is permitted, we will be able to clear all the farmers' dues by September,” Dahal said.

Dairy entrepreneurs said that the butter stock is gradually being cleared, and milk production has declined, balancing stock and output.

Last Wednesday, dairy farmers demonstrated outside the Lainchaur-based Dairy Development Corporation, demanding immediate settlement of their outstanding payments.

Police arrested dozens of dairy farmers during the protest.

Around 50 farmers were arrested as they attempted to picket the corporation.

According to the association, 600,000 families are associated with the dairy sector, contributing 45,000 jobs. More than Rs60 million cash flows from urban to rural areas daily, and the government collects revenue of more than Rs2 billion monthly.

“The agriculture ministry has called us for a meeting on Monday,” said Amar Bahadur Kunwar, president of the Central Dairy Cooperatives Association. “Both private and government dairy industries have more than Rs5 billion in dues to be paid to dairy farmers.”

Dahal said the state-owned corporation alone has outstanding dues of Rs2 billion to the dairy farmers.

The corporation even issued a public notice on June 10 inviting bids to sell its butter and powdered milk. As per the notice, it planned to sell 200 tonnes of butter (15kg block) and 300 tonnes of skimmed powdered milk (25kg bag).

In another notice on Sunday, the corporation fixed the skimmed powdered milk rates.

The country currently produces more than 6 million litres of milk daily. The corporation purchases around 25 percent of it.