ECONOMYNEXT – Sri Lanka’s dairy industry has called for a price formula to replace government price control of milk powder, saying it was required to ensure sustainability in the face of rising input costs and tax.
Local dairy supply has increased to 327 million litres in 2017 from 196 million litres in 2010, yet still meets only 40% of Sri Lanka’s growing demand, revealing a productivity and supply gap, the All Island Dairy Association (AIDA) said.
Imported milk powder prices are controlled despite a 15 per cent VAT being introduced in 2016 and the increase of other input costs, it was revealed at a forum organized by the All Island Dairy Association at the Ceylon Chamber of Commerce.
Asoka Bandara, AIDA executive committee member, highlighted the incongruity of price-controlled milk powder undergoing a 15% VAT inclusion in 2016, while global milk prices, inflation and rupee devaluation continued to increase cost to the industry.
“Fresh milk may be profitable for farmers, who may earn up to Rs. 30- 35 per litre as per our calculations,” he told the forum.
“However, processors are squeezed between ever increasing costs throughout the entire value chain and a fixed milk price for milk products especially for milk powder.”
Bandara noted that the industry had requested the government to replace the restrictive price control with a transparent and predictable price formula to determine milk powder prices.
AIDA represents a wide range of dairy industry stakeholders such as milk producers, processors, importers, and service and input providers, a statement said.
About 75% of milk comes from smallholder farmers who encounter challenges, leading to inconsistent quality standards in milk collected
Nishantha Jayasooriya, President of the All Island Dairy Association, said they see a lot of enthusiasm among farmers to increase local milk production as fresh milk is profitable for dairy farms.
(COLOMBO, June 05, 2018)