Sri Lanka Looks to Delhi for Milk after a 3-Decade Ban on Imports

Sri Lanka, which was previously opposed to allowing access to Indian dairy players, is now pleading with dairy players and policymakers in New Delhi to assist it in overcoming its current milk crisis.

Multiple trade sources confirmed that the island country's trade partners are looking to strike a deal with India to alleviate the country's dairy product shortage. Cooperative dairies in India, on the other hand, have expressed a willingness to supply the required quantities to their beleaguered neighbour, but not so easy.

In the midst of a severe economic crisis, Sri Lanka is running low on essential items, the majority of which are imported, including milk powder. Prices in retail markets have skyrocketed to Sri Lankan rupees 1,500-2,000 per kg, effectively putting them out of reach of the average person.

Insiders revealed that Sri Lanka had erected barriers to Indian dairy product imports in order to protect its domestic market and cartels. The Sri Lankan dairy market is estimated to be worth $400 million, with New Zealand and Australia catering to the majority of the demand. This has left only a sliver of a product-specific market for Indian suppliers.

‘Temporary Opportunity’

Amul, India's largest dairy company, sees an opportunity to enter the Sri Lankan market, but with conditions. "We have no objections to commodities (WMP or skimmed milk powder) (to supply). However, we must consider the long term, as they have Free Trade Agreements with other supplier countries. We can't go to Sri Lanka as a stopgap measure "RS Sodhi, Managing Director of Gujarat Cooperative Milk Marketing Federation Ltd (GCMMF), an Amul marketer, stated.

Notably, in the late 1990s, Sri Lanka pushed away from the National Dairy Development Board (NDDB), which had assisted the country in developing its dairy cooperative structure.

While India has extended a $1 billion credit line to Sri Lanka for daily necessities such as medicines, according to advocate and policy expert Vijay Sardana, "they can approach the Commerce Ministry and NDDB to allow the purchase of dairy products through this line of credit."

"Sri Lanka must understand that the trade will not be the same anymore; they will have to change their policies from what they did in the past," he said, adding that India would have to strike a deal to keep Indian dairy players in the Sri Lankan market after things normalized.

Cautious Players

Meenesh Shah, Chairman of the NDDB, believes that a country like Sri Lanka cannot rely on imported dairy products for long. "The NDDB was tasked with developing a dairy cooperative model in Sri Lanka. It started off well, but the programme had to be halted due to a variety of factors, including strong local opposition "Shah was a member of the NDDB team in charge of the NDDB-Kiriya Milk Industries of Lanka Ltd. joint venture in Sri Lanka.

"Only a government-to-government channel can now decide on the fate of dairy product supplies and the future of the Sri Lankan dairy sector. Indian dairies can enter that market, but only if the playing field is levelled "Shah stated. However, neither the NDDB nor Amul nor any other dairies, have received any communication from Indian authorities regarding potential dairy product demand from Sri Lanka.