New Zealand’s dairy firms, including Fonterra, are looking to buy up farms in India’s burgeoning dairy sector, but may not find going down that road free of bumps, a new government report indicates, according to FoodNavigator.com.
New Zealand's Foreign Affairs, Defence and Trade Committee tabled the report "Inquiry into New Zealand's relationship with India” in the country's Parliament on 10 October.
In the report, the committee pointed out India’s importance as a destination for Kiwi dairy products, pointing out that its demand for dairy products will double over the next 15 years, creating a massive supply challenge for the local industry.
India is currently the world’s largest consumer and producer of dairy products, the report said, but its dairy market does hold multi-billion-dollar potential for New Zealand if tariff and regulatory barriers are removed.
Crucially, the report also said that Kiwi dairy giant Fonterra submitted to the committee that it was prepared to contribute resources for this purpose alongside the government in enhancing the relationship with India to this aim.
Fonterra has been the company that has taken a lead into entering India.
In November last year, it signed a Memorandum of Understanding with the Indian Farmers Fertilizer Co-operative and dairy farms promoter Global Dairy Health Pvt to jointly conduct a feasibility study into a pilot dairy farm in India.
If it were to proceed, in phase one, the pilot farm could have a herd size of around 3,000-5,000 cows, Fonterra had said that time in a statement.
Nick Stride, a communications executive for Fonterra, told FoodNavigator-Asia back in June that India was on the expansion plan for the company, adding that the feasibility study was still underway.
Free trade agreement holds the key.
India’s tariffs on dairy products range between 20% and 60%, which makes it prohibitive for Kiwi dairy firms to serve the Indian market, but a pending agreement could lower these barriers.
India and New Zealand are currently negotiating a Free Trade Agreement (FTA). Under discussion are trade norms in various sectors.
However, until now, India has not committed to including agriculture under the FTA owing to increased pressure from sources at home, including farmer unions and leftist political parties.
Paul McGilvary, chief executive officer of New Zealand-based dairy cooperative Tatua said it was essential that the FTA was signed with agriculture included. Otherwise, he added, there will be no Indian market for Kiwi dairies. More at FoodNavigator.com