EU-India FTA – Curdled outlook for dairies

Courtesy: Down to Earth – Online at:

Curdled outlook for dairies

imageAmul is possibly the most valuable and well-known brand in the dairy sector and its owner, the Gujarat Cooperative Milk Marketing Federation (GCMMF), expects a turnover of well over Rs 14,500 crore for the financial year ending March 2013, a huge jump from the Rs 11,668 crore recorded in the previous year. But this is not bringing much cheer to the country’s pioneering milk cooperative. The reason: the impending free trade agreement with EU.

Managing director Rupinder Singh Sodhi says at stake will be the well-being of 3.2 million farmers in Gujarat who are members of the cooperative once the FTA comes into effect. “There will be no level playing field because we will not have any protection against the subsidised exports by rich dairy farmers in Europe,” he worries. As he portrays it, the opening up of the dairy sector to the big boys in Europe will make India’s dairy farmers extremely vulnerable to the dumping of goods. “Most of our dairy farmers own just two-three cows; in Europe dairy farms are big operations with hundreds of cattle in each.”

At the same time, dairy products from India face insurmountable barriers in EU. Sodhi says this is because EU does not clear any Indian plant for export to EU under its extremely strict sanitary and phytosanitary (SPS) standards. “This is actually nothing but a non-tariff barrier which India has never been able to break. Since their markets are not growing, they are using these tactics to keep out competitive products such as ours which do not enjoy any subsidies.”

imageUnder WTO rules, India has been allowed to impose high bound duties (the maximum tariff) of 113 per cent on a number of food items, although its applied duties or actual tariffs stand at an average of 31.4 per cent. The bound rates give India the flexibility to increase duties if a spike in imports is found to be damaging its domestic sector through the special safeguard mechanism. What the FTA will do is to erode these protective measures that have been granted at the international level by getting the duties cut to negligible levels if not abolished altogether on most agricultural goods.

Duties on import of cheese, for instance, range from 30 per cent to 36 per cent and the argument of the Indian dairy industry is that no further concession should be made on this item, which, it says, is consumed by the affluent segment and would, on the other hand, ruin domestic manufacturers.

The bigger concern for GCMMF is EU’s insistence on recognition of its geographical indications (GIs) for food products. The 27-nation bloc is reported to have applied for over 130 GIs for its food products, many of them for special cheeses and has also sought recognition for the several thousand GIs registered in EU.

This will be a blow to Amul which has two manufacturing units turning out Gouda and Emmental cheese which draw their names and reputation from the regions of Europe in which they are produced and enjoy intellectual property protection in Europe. Not only would Amul have to cease production or change the names of its cheeses but it would also restrict the cooperative from exploiting a mark which is growing exponentially.



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