The dairy sector is waiting for clarity on the implementation of the ₹8,000-crore dairy development fund to be set up under Nabard. Finance Minister Arun Jaitley in his speech said a Dairy Infrastructure Development Fund with an initial corpus of ₹2,000 crore quadrupling in three years would be used to enable expansion of milk processing capacity in the country.

Vivek Nirmal, Joint Managing Director, Prabhat Dairy, said setting up of the fund with Nabard in a phased manner will open up investment opportunities in the sector and make it more organised. About 80 per cent of milk collected is from unorganised sector.

“The fund will help add milk processing capacities, increase milk production and distribution capacities, besides strengthening the rural economy and enhancing dairy farmers’ incomes,” he added.

However, a senior dairy company official said it is not clear whether the money would be used for investment through equity contribution or provide interest subvention against loans raised by dairy companies/promoters. Either way, it would encourage investment in new dairies, he added.

On an average, an investment of ₹35 crore is required to set up a milk processing unit with two lakh litres per day (Llpd). With the corpus of ₹8,000 crore, the industry can set up 450 Llpd capacity. At an average procurement price of ₹30/litre, the investment has the potential to pump in over ₹49,000 crore annually in the rural economy.

Devendra Shah, Chairman, Parag Milk Foods, said the fund would play a key role in increasing the income level of the farmers’ and boost rural economy. However, the dairy sector was hoping for the government to assign industry status to milk products, therefore bringing milk and milk products to NIL under GST.

The renewed focus on dairy segment is a major relief as there was no dedicated government programme for investment in the dairy sector since the Operation Flood implemented by the National Dairy Development Board between 1970 and 1994.

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