The cash-strapped Dairy Development Corporation has inked a pact to supply raw cheese to a private company, a move to generate cash as Nepal’s largest dairy company teeters on the edge of bankruptcy.

The state-owned DDC will supply 1,000 kgs of raw cheese or whey made from 10,000 litres of milk daily to Himalayan Dog Chew, owned by Manaram Group, a key exporter of the hardened cheese.

Whey is the liquid remaining after milk has been curdled and strained. It is used to make Chhurpi.

The agreement was signed between Surya Prasad Paudel, general manager of the DDC, and Poonam Karki, chief financial officer of Manaram Group, on Wednesday.

“We will supply whey for a year and renew the agreement next year,” said Paudel.

Manaram Group has been exporting 100 tonnes of dog chew a month under the ‘Himalayan Dog Chew’ brand in the US market. The chew is produced in its plant in Godak, Ilam.

Chhurpi, a traditional product of the highlands, is a protein-rich cheese with a smoky flavour and hard consistency that becomes chewier the longer one gnaws at it.

This solid snack's uniquely challenging texture has been a favourite for decades for the people of eastern Nepal, eastern India, and Bhutan.

Lately, American and Canadian pooches have grown a liking for the hard cheese made of milk, and traders can barely keep up with the demand.

Paudel said the whey will be supplied from the milk collected in the DDC’s Biratnagar Milk Supply Scheme.

“The consignment will begin from December 30.”

DDC, the state-owned utility, has been struggling to pay dairy farmers for a long time as demand for milk has dropped sharply, which market insiders say was due to the price factor.

The consumer price of processed milk, which was Rs76 per litre in January 2022, has reached Rs120 per litre, after a steep 58 percent rise over three years.

Market analysts say that higher prices, compounded by the shrinking incomes of people, resulted in low demand for raw milk. Demand for other dairy items like butter also remains subdued.

“The agreement with Manaram Group will boost our cash flow,” said Paudel.

The DDC still has Rs580 million in dues to farmers even after taking a loan of Rs600 million from the government.

As per Wednesday’s agreement, the DDC will sell whey or raw cheese at around Rs650 per litre. The DDC currently collects raw milk from farmers at Rs65 per litre.

Paudel said there will be no milk holiday in eastern Nepal, at least now, due to the agreement.

He said that supplying 10,000 litres of milk to a single company, however, will not create shortages in the market.

According to the DDC, the Biratnagar Milk Supply Scheme collects 15,000 litres daily. “We will now have to increase the collection gradually to 25,000 litres,” said Paudel.

DDC buys 120,000 million litres of milk from farmers nationwide, worth Rs7.9 million daily, or around Rs230 million monthly.

Manaram Group, the renowned exporter of dog chew, has been collecting 6,000 litres of milk from nearby districts and producing dog chew at the Ilam plant.

As the collection of milk is insufficient, the group buys dog chews from small dairy farmers in Dhankuta, Sankhuwasabha, Ilam, Panchthar and Taplejung districts.

The demand for dog chew has been growing in overseas markets, particularly in the US, Canada and the UK, with more and more people there owning pets.

The shipment of dog chew from Nepal increased 17.6 percent to Rs1.02 billion in the first four months of the current fiscal year until mid-November, compared to the same period last fiscal, according to the Trade and Export Promotion Centre.

Of the Rs1.15 billion, Rs1.02 billion worth of dog chew was exported to the United States, Rs77.29 million to Canada and Rs19.57 million to the United Kingdom.

The country exported dog chews worth Rs3.18 billion in the last fiscal year.

Dog chew exports have shot up by more than 240 percent in the past six years, as 90 percent of what is produced in the country is sent abroad.

DDC now has Rs580 million in outstanding payments to dairy farmers.

As sales did not improve in summer, the key consumption period for dairy products, on September 27, the DDC requested a loan from the government to pay the farmers.

Subsequently, the Public Debt Management Office issued a loan of Rs600 million. DDC expects the dues to be cleared by mid-July.

The corporation has enforced quotas to buy milk from farmers in different parts of the country.

The corporation introduced a quota system for buying milk from farmers in Dhangadhi and Nepalgunj under its Milk Supply Scheme project, as the collection cost has risen. The DDC has 500 tonnes of powdered milk and 600 tonnes of butter in stock. It plans to export butter to Tibet, China, and is doing necessary paperwork.