Amul can’t beat Nandini in Bengaluru after Karnataka’s Rs 1,200-crore incentive to farmers
Currently, a liter of Nandini toned milk in Bangalore costs consumers only Rs 39 and has 8.5 percent SNF and 3 percent fat (solids-not-fat). Whereas, reaching the price of Rs. 54 per liter in Delhi and Rs. 52 per liter in Gujarat for Amul-flavored milk.
Despite all the political commotion surrounding Amul's "entrance" into the milk market in Karnataka, which was accentuated in the lead-up to the state Assembly elections, the economic situation is straightforward: The Gujarat Cooperative Milk Marketing Federation (GCMMF) and other dairy companies are not in a position to compete with the Karnataka Cooperative Milk Producers' Federation (KMF) at this time.
The cost is the cause. The most affordable milk in India is produced by KMF and sold under the Nandini brand rather than Amul by GCMMF. Now, customers in Bengaluru just pay Rs 39 for a liter of Nandini-toned milk containing 3 percent fat and 8.5 percent SNF (solids-not-fat). Compare this with the Rs 54 per liter price for Amul toned milk in Delhi and Rs 52 per liter in Gujarat.
In Gujarat, GCMMF charges Rs 64 per liter and Rs 66 per liter for full-cream milk with 6 percent fat and 9 percent SNF, respectively. This milk from Nandini was being sold for just Rs 50 for a liter and Rs 24 for 500 ml up until the beginning of March. Since then, KMF has increased the price subtly by maintaining the same prices for 900 ml and 450 ml smaller packs, respectively.
But, even after accounting for "shrinkflation," Nandini full-cream milk still costs between Rs. 53 and Rs. 56 per litre, which is significantly less than Amul. In comparison to Amul's 450-gm packet, which costs Rs 30 (about Rs 66-67/kg), Nandini curd's maximum suggested retail price is only Rs 47 per kg.
"KMF is incomparable to anyone. Nandini has a near monopoly in Karnataka thanks to its low costs, an industry insider claimed. But why is the price of Nandini milk so cheap that no other supplier, whether cooperative or private, can compete?
It has to do with a plan that was the brainchild of the late Chief Minister BS Yediyurappa. In September 2008, the BJP government, led by him, began offering farmers a Rs 2 per liter incentive in addition to the district unions' purchase price when they supplied milk to those organizations. The incentive was doubled five years later, in May 2013, and increased to Rs 5 percent liter in November 2016 by the Siddaramaiah-led Congress government. The government of Karnataka offers milk farmers an incentive totaling roughly Rs 1,200 crore each year.
The Karnataka government was accused of destroying the "state's pride," the Nandini brand, by opposition leaders like JD(S) leader H. D. Kumaraswamy and Leader of the Opposition from the Congress, Siddaramiah. Karnataka Chief Minister Basavaraj Bommai defended Amul's entry and downplayed any threat to Nandini.
Among all such conundrums, Siddaramiah of Congress has tweeted to PM Modi by saying that “Is your purpose of coming to Karnataka is to give to Karnataka or to loot from Karnataka? You have already stolen banks, ports, and airports from Kannadigas. Are you now planning to steal Nandini (KMF) from us?,” with the hashtags AnswerMadiModi and SaveNandini.