Indian government incentive to boost SMP exports

Published 22 August 18

Indian exports of skimmed milk powder (SMP) are expected to rise substantially, following a government incentive to make the product more competitive on global markets.

The leading Indian milk producing states, Gujarat and Maharashtra, have offered a subsidy of 50,000 rupees per tonne (approximately £553 in July 2018) for exports of SMP. Furthermore, the central government has approved an additional subsidy of 10%, with the aim to increase milk powder exports to support domestic markets. Domestic milk prices have hit a three-year low and come under further pressure from rising feed costs.

Industry reports suggest the regions may have up to a 300,000 tonne stockpile of SMP, which has weighed in on the domestic price. Exports from the nation could increase up to 100,000 tonnes between April 2018 and March 2019, a near 8-fold increase to the same period the previous year.

Dairies have traditionally only exported relatively low volumes of SMP due to strong premiums gained from selling the product domestically compared to overseas. The introduction of the government subsidy will narrow this gap and give dairies the incentive to consider other markets.

India is currently not one of the major players in the SMP export market. In 2017, India exported 10,100 tonnes of SMP, while the US, the largest exporting nation, exported 608,000 tonnes. If Indian exports of SMP lift to 100,000 tonnes, its global export position would move from the 24th to around the 9th largest exporter of SMP. A substantial rise in exports from India could affect global markets by introducing downward pressure into the market due the extra supply.