Dairy producers on Thursday urged the government to introduce a “seasonal pricing” system on milk to prevent ‘Milk Holiday’.

Large quantities of powder milk and milk-related products like butter and ghee remained unsold since the last few months due to reduced demand and Nepali dairy industry’s inability to compete with the imported products.

Some dairy factories have stopped purchasing milk from farmers as they have surplus products. A huge gap in supply and demand suggests that milk holiday could reoccur within a couple of weeks.

Pradeep Maharjan, president of Dairy Industries Nepal, said that the government’s decision to hike the milk prices without analysing the international market price has created problem in the domestic market.

“The state-owned Dairy Development Corpora-tion (DDC) had decided to hike milk prices at the time when the international prices were in downward trend. Price of powder milk has dropped by almost half in the international market a few months ago,” said Maharjan.

Milk in Nepali market costs Rs 5 more per litre as compared to the Indian markets, he noted, adding that the price factor has made Nepali milk less competitive.

Powder milk, priced at Rs16,000 per sack (25kg) in the international market until last year, has dropped sharply to Rs8,000 now due to milk surplus, according to traders. Due to the price factor, industry sources said, the Nepali market is now flooded with powder milk imported from India, New Zealand and the Netherlands.    

Not being able to compete with imported powder milk, Chitwan Dairy—the largest producer of powder milk in the country—shut down its operation. Amid reports of large quantities of imported ghee being stocked, traders urged the government to increase the customs valuation of ghee to make Nepali market competitive.

“The problem of milk holiday would be solved to some extent if the government increases customs valuation,” said Sumit Kedia, president of Nepal Dairy Association. He suggested customs valuation of imported ghee be hiked to Rs720 per kg from the existing Rs 400. According to the association, the dairy industries have ghee worth Rs1.5 billion in stock. Some dairies have started promotional campaigns to push sales, with the DDC taking a lead by slashing the price of ghee by Rs30 to Rs720 per kg. And other private dairies have soon followed suit. Ganga Prasad Timilsina, general manager at the DDC, said the government should encourage traders to export produces to India. He said that dairy factories should diversify their market as well as the products.

“After the April 25 earthquake, demand for milk, ghee, ice-cream, among other dairy products, has dropped sharply. As a result, we have large volumes of surplus milk,” Timilsina explained. “As we cannot purchase milk on

regular basis due to surplus stock, we need to export it during the flush season.” The milk production in Nepal starts to peak in mid-September which lasts for about six months.