We’ve all grown up on the ideals of drinking a glass of milk every day. However, in Maharastra, that’s not always possible, as a severe milk shortage has hit the state after dairy farmers protested by spilling milk onto the streets after not being compensated accordingly.
According to reports, the protest have put dairy stocks on the decline with Parag Milk Foods recording a 5% drop in the BSE and Prabhat Dairy declining by 10%. Analysts have said the increase in procurement prices from farmers from July 21 would impact these dairy companies’ margins.
The Maharastra government has fixed the procurement price of milk at Rs 27 per litre, but farmers allege that they barely get Rs 17 per litre. Hence, private and co-operative milk unions in Maharashtra announced a raise in the procurement price by Rs 3 per litre effective July 21.
“While the impact on Parag Milk will be relatively lower as compared to Prabhat Dairy since two-thirds of Parag’s product portfolio comprises of value-added products where gross margins are much higher, compared to 30 percent for Prabhat,” said Mehul Mehta, senior research analyst, Sharekhan.
Although the state government is likely to offer up a subsidy in order to cover the hike of the procurement price, the difference in the burden of the subsidy may affect dairy companies further.