ISSN: 1391 - 0531
Sunday December 16, 2007
Vol. 42 - No 29
Financial Times  

Milk for the nation

When US Ambassador Robert Blake first arrived in Sri Lanka he was surprised to find that Sri Lanka produced just 20 per cent of its milk requirements while the balance was imported.

Speaking at a recent Cargills event where the company celebrated its ISO achievements, the US diplomat said Sri Lanka was a country with a large human resource base and lot of land, implying that dairy should be one of our biggest growth sectors.

For many years there has been discussion, debate and consensus on developing a proper dairy industry. However, Cargills CEO Ranjit Page admits, “We have been talking too much, including myself! Now it’s time for action.”

Cargills has been looking at the Amul Dairy model in India which Blake spoke of when he said India from being an importer of milk products has become – through the Amul Dairy initiative – one of the world’s biggest producers of milk products. But Cargills’ efforts have been probably stalled by stops and starts as far as government policy is concerned.

Last year an Indian entrepreneur, in Colombo to launch a housing project at Kollupitiya, also spoke of starting a dairy project in the north central region. There has been no word since then on this project.

Cargills is determined this time to go ahead with a mega dairy project to support its current efforts where all milk requirements for its ice cream plant comes from pure cow’s milk through a farmer chain it has set up.

Many decades ago during the growing-up years of the 1950s-1960s generation, fresh liquid milk was freely available from the state-run Milk Board. There was a string of small tin-sheds across the countryside that sold fresh milk in bottles – vanilla and chocolate – and that was a favourite amongst school children. However for various reasons, this steady flow of fresh milk suddenly dried up in the 1970s and early 1980s and it came the multinationals with their powdered milk turning Sri Lanka into an import-dependent country in terms of milk. Local fresh milk farmers were unable to compete with the might of the milk powder barons from New Zealand and Australia and as a result milk powder became a necessary evil. The Milk Board – as it was popularly called – died a natural death until it was quietly revived through an Indian company.

Milk powder prices have soared through the roof and currently international prices are rising in New Zealand and Australia due to growing demand in China and India (which is also importing due to rising local consumption). This is expected to further push up prices in Colombo where milk powder importers have been having running battles with the Consumer Affairs Authority over pricing issues. Current prices of imported milk powder – which is also used in ice cream production by companies other than Cargills – has reached panic button stage and resulted in a fall in consumption patterns due to high cost.

Last month USAID hosted a conference in Colombo to discuss strategies to improve the dairy industry and reduce dependence on imported milk powder while encouraging economic development in the war-torn east, much of which has been cleared by the military.

It is reported that Sri Lanka imported 70,000 metric tons of milk powder at a cost of Rs 17 billion last year, a figure expected to double in 2007. Participants at the discussion were optimistic that improving domestic production of fresh milk could reduce the country’s dependence on imported powder, boost the economy, and improve children’s health.

Private sector perspectives were provided by Cargills’ Page and Lindsay Saunders, a New Zealand-based livestock consultant affiliated to Fonterra. The latter said, under various initiatives, production could be increased to 30-40 percent by 2020 which was countered by some others who said if milk importers had allowed the local industry to flourish, the country would have been self sufficient by now!

Well known entrepreneur Ariyaseela Wickramanayake of Pelawatte Dairies says there is potential to improve production by up to 300 percent, and with the confidence by Cargills in reactivating the dairy industry, this figure is most likely achievable. Cargills and others keen to develop the dairy industry should be given the fullest state backing in creating a roadmap without any blocks. Milk is vital for the nation and its sustenance and if the private sector is willing to provide fresh milk to the entire nation at an affordable price, then its efforts should not only be applauded but encouraged by everyone without any bias.

However a word of caution: Don’t entirely stop or discourage imports (raising taxes or through other means) -- in the name of boosting local production -- as 80 percent of the population is still dependant on milk powder. The process of reducing imports must be gradual and until Sri Lanka is self- sufficient.


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