Before the adoption of an open economy in 1977, Sri Lanka was 80 percent self-sufficient in fulfilling the milk requirements. However, at present, Sri Lanka is around 40 percent self-sufficient. This has resulted in importing nearly 100,000 metric tons of powdered milk to the island, spending more than US $ 400 million per year, while our neighbour India remains the world’s largest milk producer.
This article discusses the challenges faced by the local dairy industry and why Sri Lanka is struggling to become self-sufficient in milk.
Import of powdered milk
The Sri Lankan dairy industry survived for many years and prior to the adaption of the open economic policies in 1977, the local milk production satisfied around 80 percent of the domestic milk requirement.
Through the open economy, Sri Lanka looked at short-term wins, which attracted several multinational companies to start businesses in Sri Lanka and dominate the dairy industry. This has now resulted in the spending of millions of dollars to satisfy the local demand and has sadly led to overseas farmers and cooperates benefitting from such action.
In 2014, the Health Ministry authorities took a positive step by banning telecast, broadcast and publish of all milk powder advertisements over electronic and print media. The Health Ministry also imposed a heavy tax on imported milk powders. However, in 2017, the import duties on all varieties of milk powder was reduced from Rs.225 per kilogramme to Rs.2 per kilogramme and the ban on milk powder advertisements was lifted.
It is questionable whether the consumers are receiving the real benefit of this tax reduction, as the global milk prices haven’t come down and the retail price of milk powder hasn’t gone down in proportion to the tax deduction.
Even more so, the demand for local milk went down dramatically affecting thousands of local farmers, leading to instances where the farmers had to throw thousands of litres of milk away and Milco had to absorb milk at a loss. It is surprising to think why we have to import such a large amount of powdered milk while our neighbour India is the world’s largest milk producer feeding a population of over 1.3 billion. It is important that the necessary authorities look into this cash overflow, which benefits the overseas farmers and cooperates, whilst the local dairy farmers of Sri Lanka suffer, even though they have the potential to empower themselves.
Wrong consumer perception on milk powder and fresh milk
Milk powder is manufactured by removing the moisture by boiling the milk under reduced pressure at low temperatures using an evaporation method. The resulting concentrated milk is then sprayed in a fine mist into hot air to remove further moisture, transforming it to a powder form.
During this process, most of the natural nutrients and vitamins in milk (thiamin, riboflavin, vitamin A, B, D, etc.) is lost and replaced by artificial vitamins later on in the manufacturing process. This may cause weight gain, high blood pressure and even hormonal imbalances in those who consume this powder.
In addition to this, the quality of milk used in this process is highly questionable. In 2008, around 52,000 Chinese children were poisoned by melamine-tainted dairy products, which resulted in the ban of Chinese dairy milk powder in many countries, such as Africa, Indonesia, Taiwan, Japan, Singapore and Malaysia.
In 2013, China halted imports of all milk powder from New Zealand and Australia after a bacterium called clostridium botulinum, which can cause botulism, was found in some dairy products made from powdered milk. In the same year, another case was reported where a toxic chemical called DCD (a nitrate inhibitor used in fertilizers) was found in imported milk powder in Sri Lanka.
Recently, in 2017, France ordered a ban on the sale of baby milk formula and ordered a recall of several types of baby milk and baby food products, which were contaminated with Salmonella. These are only a few of a large number of reported cases on milk powder.
Sri Lanka is one of the very few countries in the world that still consumes milk powder and in contrast, countries such as the United States, Europe and even Australia and New Zealand very rarely sell powdered milk in retail stores. In some instances, the foreigners who visit Sri Lanka are taken by a surprise when they
see powdered milk.
As a result of the commercial adverts and lack of knowledge on the harmful effects of powdered milk, Sri Lankans tend to prefer powdered milk over fresh milk. There is also a wrong consumer perception in Sri Lanka that fresh milk can cause conditions such as flem and asthma.
Lack of medium and large-scale dairy farms
Currently, the local dairy animal population in Sri Lanka is at 1.3 million and produces approximately 40 percent of the total annual dairy consumption. Smallholder dairy farmers dominate the livestock industry with an estimated 300,000 registered farms and of this, 72,400 people depend solely on dairy as their main source of income.
Smallholder dairy farmers who supply about 90 percent of the milk collected in Sri Lanka are mostly from rural and plantation areas and often run their dairy farms with inadequate dairying knowledge and training.
If you take countries such as India, Germany, Australia and the Unites States, which are currently self-sufficient, it is obvious that they are built around medium and large-scale dairy farms, which have the state-of-the-art technology allowing them to achieve the maximum potential from cows.
In 2013, the then government initiated a project to promote medium and large-scale dairy farming by importing 20,000 high-yielding cows to Sri Lanka with the aim of becoming self-sufficient in milk by 2016. They also, introduced a commercial scale dairy development loan scheme to promote the use of modern machinery and state-of-the-art infrastructure.
The present government continued this project and distributed more than 5000 heifers to medium-scale private farmers. However, these farms are now struggling to make profits due to the high feeding cost and low milk prices. By taking these positive steps introduced by the governments, it is important that the authorities now focus on a strategy to ensure that Sri Lanka becomes self-sufficient in milk by 2020 and make medium and large-scale dairy profitable.
Low profit margins for dairy famers
In Sri Lanka, a litre of fresh milk is purchased from a famer between Rs.60 and Rs.75 and retailed at around Rs.200 and Rs.250 per litre, which has resulted in massive retail margins.
In India, the Operation Flood programme launched in 1970 transformed India from a milk-deficient nation into the world’s largest milk producers in less than 30 years. This created a national milk grid, which linked milk producers throughout India with consumers. This integrated co-operative system ensured proper management of milk collection, transportation, processing and distribution. This reduced seasonal and regional price variations and ensured that the farmers got a major share of the price consumers pay, by cutting out middlemen and retailer margins.
A similar strategy to that in India is required here in Sri Lanka to ensure that the farmers experience higher profits, which will then be reinvested to enhance productivity.
High cost of production
Lack of profitability is one of the main problems faced by the Sri Lankan dairy farmers. As a result, farmers have adapted to a low-cost production system, which has resulted in low milk yields. A dairy cow must eat a balanced diet with enough energy, protein, fibre, water, minerals and vitamins to cover their own maintenance and growth and importantly, the milk production.
In Sri Lanka, the majority of the farmers use normal grass as fodder, which has very little nutritional value. This is mainly due to the limited land availability for fodder cultivation such as maze, sorgum and sugar graze.
The available fodder is sold at a very high price, which is not practical for the farmers to afford. Also, concentrates provide the essential extra energy and protein for dairy cows on top of forages to support high production levels.
However, at present, the concentrate prices are also not affordable. Although the government has reduced the tax on some of the concentrate ingredients, the farmers are yet to experience its benefits as the retail prices remain the same.
Taking these factors into consideration, it is not practical to expect high milk yields from local dairy farmers. A government initiative is required to put in a price formula for cattle feed and a zero-tax policy on all cattle feed ingredients.
It would also be interesting to look at directly importing cattle feed with high nutrient values. Even though the government will lose a certain income on taxes, there will be a higher long-term gain by reducing the cost on powdered
Taking all these factors into consideration, it is critical that the government and the private sector collaborate and put in the required formulas for milk pricing and sourcing to save the local dairy. The government needs to look at providing tax benefits and concessions for imported cattle feed ingredients and farm medicine.
Also, it is a must that the government rethinks the policy on import duty for milk powder and ensures that importation of milk powder is discouraged. As we are currently experiencing an all-time low of Sri Lanka rupee, it is important that the country now looks at strategies to reduce imports and by promoting local dairy industry we can directly save US $ 400 million per year.
All in all, fresh milk consumption will both improve the health of Sri Lankans as well as saving millions of dollars annually.
As a qualified mechanical engineer, I have an in-depth understanding in technology and its aptitude for solving engineering and scientific problems. The successes I achieved in the academic research during my graduate studies significantly aroused my seal for taking up innovation as my lifelong pursuit.
My research interests have changed from engineering through material science into bio materials. This cross-disciplinary research experience has significantly broadened my knowledge that would prove extremely instrumental in research and innovation.
(Kanishka Fernando is currently working as a technology entrepreneur in one of the leading apparel companies in Sri Lanka. He has also ventured into dairy and is looking at developing innovative agricultural solutions to uplift the Sri Lankan agriculture industry)