Milk price rise makes sweets costlier this Diwali:What’s driving rates up?

Milk prices have risen sharply across India lately. Dairy brands have increased milk prices by up to 17% over the past year. Is it due to an unexpected demand spike or inadequate supplies from India’s major milk-producing states like Uttar Pradesh, Madhya Pradesh and Gujarat? Milk is considered an essential food in India. But the constant rise in its prices may have proved a double whammy for many households. Higher prices may have made the product unaffordable for the needs of growing children and, at the same time, increased the costs of other allied products like sweets, curd, ghee, ice cream, etc. – an indispensable part of the Indian palate, especially during festive seasons like Dussehra and Diwali, when these food items are in high demand. Factors driving milk prices higher: Early milk stocking by ice-cream ghee makers Some traders believe bulk purchases by ice cream manufacturers to plan early for the summers, along with steady demand growth, may have contributed to the rise in milk prices. Milk traders in Bhopal and Anand (Gujarat) say demand for milk, curd, butter, and ghee has risen sharply in recent months. Gaurav Yadav of Gaurav Dairy and Dewand Bhatt of Santram Dairy Foods say that when daily demand is high, even a small supply gap can immediately trigger a spike in retail prices. Yadav says, “Commercial ice cream brands have begun stocking milk earlier than usual this year to prepare for summer production. They are buying large volumes of milk from the regular supply chain to store it as powder or frozen fat. Hence, there has been a visible shortage for daily buyers, leading to a rise in milk prices.” However, he is hopeful that the situation will improve. “I am getting robust industrial demand for milk these days. Plants are being set up in Madhya Pradesh because of the government’s continued financial support to dairy farmers. They are also getting higher subsidies now,” says Yadav. High-procurement winter season: November-to-February period is usually a high-procurement winter season for India’s dairy processing sector. Dairy cooperatives ramp up milk collection during these months to convert surplus milk fat into butter and ghee, support domestic inventory, and meet consumer demand. As such, ice cream manufacturers, too, buy large quantities of milk ahead of peak summer. Rising transportation costs: The spike in diesel prices due to the US-Iran war has had a domino effect in the Indian market. Higher diesel rates led to higher transportation costs for milk traders, forcing merchants to pass on the burden to end consumers. Global crude oil prices have gone up by 71% from around $70 per barrel to as high as $120 per barrel since the beginning of the war. High cattle feed costs: Prices of maize and oil cakes, which are used as fodder, rose significantly over the past year. According to a report, maize has become costlier by 8%, while maize-based cattle feed rose by 75%. Poultry farmers had to pass on the additional burden to milk consumers. Is the price rise linked to muted milk production growth? According to the Ministry of Fisheries, Animal Husbandry and Dairying, production increased by around 3.5% in FY2024-25 year-on-year. During the period, milk production was pegged at 247.87 million tonnes, which was higher than 239.30 million tonnes recorded in FY24. India accounts for roughly 25% of the world’s total milk output, making it one of the largest producers. Additionally, India exports around 67,500 metric tonnes of dairy products annually, worth about ₹2,270 crore ($284 million). Despite producing a quarter of the world’s milk, India accounts for only 0.25% of dairy exports, as most of the produce is consumed domestically. Impact on the market: State milk federations raise rates by up to ₹5 per litre Amul: It increased the milk prices across various products and packet sizes by ₹3 per litre to ₹5 per litre. The Gujarat Cooperative Milk Marketing Federation (GCMMF), which markets Amul products, attributed the decision to rising animal feed, packaging, and fuel costs. Similarly, major dairy cooperatives in Madhya Pradesh and Karnataka, such as Sanchi, a Cooperative Dairy Federation in MP, and Nandini, a Karnataka Milk Federation, have also increased milk prices across key variants. Sanchi: Serving regional markets across Madhya Pradesh, Sanchi followed national price trends by increasing milk prices across variants to match rising raw milk collection costs. The dairy brand has hiked rates by up to ₹4 per litre. Nandini: It maintains lower retail rates than national competitors due to state subsidy structures. However, the Karnataka state cabinet approved rate adjustments to ensure sustainable payouts for dairy farmers by increasing the rates by around ₹8 per litre. Why is the milk price rise concerning? Milk prices are on the rise despite being an essential commodity in India. Under the Essential Commodities Act, 1955, the government monitors items that are critical for daily life. Milk and dairy products fall under the purview of essential food items. Under this law, the government holds the power to: Milk is also a part of the government’s free school meal programme Although milk is not mandatory under the Centre’s PM POSHAN Scheme (formerly Mid-Day Meal Scheme), state governments such as Karnataka (Ksheera Bhagya scheme), Madhya Pradesh, and Gujarat provide fresh milk or milk powder to primary and upper primary students in government schools to tackle malnutrition. Recent govt crackdown on fake milk products The Food Safety Authority (FSSAI) has clamped a nationwide ban on the illegal “analogue” paneer, derived from non-milk products like vegetable oil and starch, to protect people’s health. State governments like Chhattisgarh, Maharashtra, Gujarat, and Madhya Pradesh have already banned the production and sale of analogue paneer. Yadav said that the ban has created a gap in some wholesale markets where this illegal product was sold, pushing the procurement costs up.