The state-owned Dairy Development Corporation (DDC) and private dairies have been able to settle only half of the dues in the past one year as dairy demand remained subdued even during the festival season.

Both private and state-run dairies were optimistic that the festivals in October and November would push up sales.

Surya Prasad Paudel, general manager of the DDC, said there has been no improvement in sales even during festivals, which ended recently. “We gave festive sales targets to super markets like Bhatbhateni and Big Mart but those targets were not met.”

Dairy farmers say out of an estimated Rs6 billion due to be paid by dairies, they are yet to receive Rs3 billion.

“We had Rs1.58 billion in arrears to be paid to dairy farmers as of July. In the past four months, we cleared Rs1 billion in dues,” said Paudel. “We will gradually settle the remaining dues.”

“We are focusing on product marketisation so that we can clear the remaining dues,” he said, adding that the DDC is planning to outsource private company to market and sell the stocks piling up.

As sales did not improve, on September 27, the Public Debt Management Office loaned Rs600 million to the DDC.

DDC exported 1,000 kilos of ghee to Japan last month.

“We are expecting a monthly export of 5,000 kilos of ghee to Japan and making necessary preparations for that,” said Paudel.

“A company has approached us to buy dairy products made from 10,000 litres of milk. We are in the agreement phase and discussing specifically on pricing.”

Paudel did not reveal more but said the company exports goods to the US and other markets.

DDC is planning to reduce the price of ghee targeting the consumer segment.

“The decision on reviewing the price on ghee will be taken on Tuesday or Wednesday,” said Paudel.

DDC buys milk worth around Rs200 million from farmers monthly.

According to the corporation, it has 400 tonnes of skimmed powder milk and 400 tonnes of butter in stock.

Since the corporation has to pay back the loan and clear the dues to dairy farmers and different parties, Paudel said it will take some measures to cut unnecessary expenditures.

A committee was formed to recommend reforms and cost-cutting measures. “We have received the report and we are planning to implement it.”

Private dairies claim to have settled all outstanding dues of the farmers.

“We have cleared all the dues of farmers by taking loans from the bank. The festive demand increased the consumption of dairy products which also helped in clearing arrears of farmers,” said Prahlad Dahal, president of the Nepal Dairy Association.

Earlier, the private dairies asked the government for loans by putting butter and powder milk stocks as collateral, but the government did not respond.

The association had said that the private dairies had around Rs2 billion dues to be paid to the farmers a month and a half ago.

According to the association, the private sector has 2,000 tonnes of unsold butter in stock.

The sale of dairy products improved in the festive season sales but the off-season of dairy products has started, the private dairy entrepreneurs said.

“We normally convert liquid milk into powder milk during March-April when the sales decline,” said Dahal.

The association said that 3.2 million litres of milk arrives in the market daily, of which around 25 percent is held by the DDC and the remaining is purchased by private dairies.

The daily milk purchases of the private dairies amount to around Rs100 million.

“Out of the around Rs6 billion in arrears, both the government-owned DDC and private dairies have cleared around Rs3 billion till now,” said Amar Bahadur Kunwar, president of the Central Dairy Cooperative Association. The DDC has sent the dues amount to dairy farmers’ accounts.

As the sales will decline from December to February, dairy farmers might not get their payment on time again.

The output of dairy products like curd and ice cream declines in winter, increasing the stock of milk, which adds to the arrears, said Kunwar.

The total arrears, including the old, may reach Rs5 billion in these three months, said Kunwar.

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

Most of the farmers in eastern Tarai faced even more hardships as it has been nearly a year since they received any payments.