Milking the consumer

Tuesday, 31 December 2013 00:01 -     - {{hitsCtrl.values.hits}}

MAKING the country self-sufficient in milk has been one of the main goals of the Mahinda Rajapaksa Government and since its election has been importing costly foreign cows to boost local production and reach the ambitious target by 2016. However, there are concerns that the entire production line of the industry has not been given equal attention. According to government records there are 238,322 registered dairy farmers while the number of unregistered dairy farmers are said to be nearly 100,000. Two hundred and four million litres of milk are obtained annually from 251,490 dairy cows. The number of buffalos is around 86,220 and they provide 5.5 million litres of milk annually. The daily production of milk in Sri Lanka is 800,000 litres according to the Livestock and Rural Community Development Ministry. Animal product and health product reports say milk consumption per person in Sri Lanka a day is 135 millilitres. According to the Medical Research Institute’s recommendations this consumption should be 100 litres. If Sri Lanka is to become self-sufficient in milk the annual production should rise to 732 million by the end of 2015 from the present 258 million. A total of 800,000 litres of milk reach the market each day. Of this amount the Milco, Nestle and Pelawatte companies purchase nearly 500,000 litres per day. Accordingly, Milco buys 210,000, Nestle 160,000, Pelawatte 130,000, Kothmale 40,000, Ambewela 30,000, Lucky Yogurt 18,610 and Rich Life 11,030. In addition there are small scale milk foods products and the rest for private consumption. Only 33% of the country’s milk requirements are produced locally. The balance 67% is imported. During the seven years (2005-2012) after the Government came to power, total milk production has increased by 107 million litres. It is a 56% increase. The number of dairy cows has increased by 155,000. If milk can be obtained from 300,000 more cows, Sri Lanka will become self-sufficient in milk. This at least is the tale on paper. Yet during the last few weeks a strike by Milco workers has strangled production with two of the company’s production facilities coming to a complete stop. Various reports estimate that the loss from the strike is as much as Rs. 300 million while consumers have been seriously inconvenienced by the lack of locally produced milk powder. Since Milco is the largest processor of locally produced milk it needs to be run in as professional a manner as possible but trade unions have demanded the removal of the Milco management citing corruption and wastage. The stand-off finally ended when President Mahinda Rajapaksa intervened and pledged to address the workers’ concerns. Lack of transparent dispute resolving mechanisms were badly on display in this instance. It would seem that from vegetables to milk powder industries cannot exist without political intervention from the top. The whole mess is now before a labour tribunal and consumers, at least in the short term, can be assured of some relief. But this does not mean that their due is assured for in a protected market such as Sri Lanka’s where import substitution is championed and monopolies are the natural result. This means that consumers are forced to pay high prices and are not always given a good quality product consistently. Import substitution has failed across the board in many countries over many decades, this is a fact that the Government has to be aware of and create space for competition between companies so that corruption and mismanagement are kept at a minimum. Consumers must not always have to pay the price.