Fresh milk is transported daily from Gokul Dairy in Kolhapur to markets in Mumbai and Pune. The dairy operates 130 tankers to ensure that the milk reaches homes every morning. Additionally, Kolhapur supplies milk to Goa and Karnataka. However, like many other dairies, Gokul is currently facing a diesel shortage and rising fuel prices, which threaten its smooth operations.
Yogesh Godbole, the managing director of Gokul, said that over the past two days, they have struggled to secure enough diesel for both milk-collection trucks and distribution tankers. The dairy procures 1.8 million litres of milk from farmers and supplies 1.6 million litres of packaged milk, primarily to Mumbai and Pune, where it is one of the top two players in the market. Although Gokul has its own petrol pump, the stock is dwindling due to limited quotas, which are insufficient for their needs. Their packaging centre in Mumbai is also affected, as the boilers at that facility run on natural gas, which is currently in short supply.
Despite these challenges, Gokul has managed to maintain operations and hold prices steady. The dairy is also faced with a shortage of packaging materials, which include plastic pouches for milk, PET bottles for flavoured milk, ghee jars, and ice cream tubs/boxes. They are holding prices for now. Godbole expressed concern that if the situation does not improve, it could jeopardise their ability to operate effectively.
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Leading dairies in Maharashtra are grappling with a shortage of essential supplies and increasing fuel costs, and many indicate that a price rise is likely.
Rajiv Mitra, a senior dairy industry expert, mentioned that while dairy may seem like a domestic industry, its economics are influenced by global factors. He noted that the ripple effects of the conflict in the Middle East will impact Indian dairies and dairy farmers. If oil prices continue to rise, logistics costs for dairy will increase due to the daily movement of milk from procurement to chilling and transport. Mitra said dairy companies will need to develop independent strategies to manage inflationary pressures and will likely have to pass some of these costs on to consumers. Even if the conflict resolves, it may take a significant amount of time for normalcy to return, Mitra added.
From Boilers to Bottles
According to Ujjval K, founder of Gokulya, a dairy venture, around 90% of chilling centres use ammonia for milk chilling, and the price of ammonia has surged by nearly 40%. Similarly, packaging costs for polypropylene and low-density polyethylene have increased by 35-40% due to the petrochemical crisis. Additionally, animal feed costs have risen sharply, with maize prices doubling, severely affecting cattle feed, he said.
MRP Breaking Point
Dairy industry representatives in Maharashtra are scheduled to meet next week to discuss the current crisis and address rising input costs, as well as the shortage of essential supplies. Nikhil Chitale, managing partner of Chitale Dairy, noted that the industry has absorbed these rising costs to avoid passing them on to consumers during the festive season. The dairy business operates on very thin margins and is highly price-sensitive. If input costs continue to escalate at this rate, producers may have no choice but to revise the Maximum Retail Price (MRP) for milk and dairy products.
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The ongoing conflict in the Middle East has already led to a 15-20% increase in costs over the past few weeks and has disrupted the supply chain for milk and dairy products, according to Chitale. Supplies of essential packaging materials, such as polyethene for pouches, plastic crates, high-impact polystyrene, and furnace oil, have been compromised. Currently, the inventory of pouches at Chitale Dairy is down to just one day’s supply, with suppliers urging dairies to limit orders to this minimal requirement. Chitale Dairy typically processes 8,00,000 litres of milk daily and maintains a week’s worth of packaging materials in stock; however, they are now purchasing supplies on a daily basis. Additionally, there has been a sharp rise in costs and a shortage of industrial fuels, such as low-sulfur heavy stock and furnace oil, which are essential for operating boilers in the dairy industry.
Some smaller dairies, unable to absorb these increased costs, have been forced to halt operations.
TOPICSfuelThis article was first uploaded on March twenty-five, twenty twenty-six, at fourteen minutes past ten in the night.