New Delhi: Price of tea, coffee, sweets and other dairy products are likely to be costlier as the country might witness a hike in milk prices in the coming quarter. According to a report by CRISIL, a litre of milk will become costlier by Rs 1-2 owing to a decline in skimmed milk powder inventories and decreased supply of milk. This price hike may affect several milk products such as butter, ghee, cheese, lassi and other milk products. However, there has been no official announcement by milk producing companies including Amul and Mother Dairy. Amul, Mother Dairy, Kwality, Britannia, Nestle rely heavily upon milk production as they have many products and brands in the milk range which are of day to day use.

The price hike, however, is expected to improve the dairy sector’s operating profitability by 30-40 basis points (bps) next fiscal. While domestic milk production is expected to slow down by 3-4 per cent in the upcoming financial year 2019-20, the consumption will see an upward trend of 6-7 per cent leading to an increase in price. “Consumption, however, will continue to grow… enabling dairies to raise milk prices,” CRISIL report said.

“The impact was immediately visible in the form of higher average monthly SMP exports of nearly 5,000 tonne between September and December 2018, a ten-fold increase compared to those in the same period in 2017,” a CRISIL official said.

The last price hike in dairy industry was done in 2017 when price of milk was increased by Re 1 per litre. Skimmed milk prices have seen a 20 per cent increase on a global level which may compel dairies to liquidate their stock, the report added. About 25 per cent decrease in the inventory of skimmed milk is expected from the 3 lakh tonne which was available at the end of March 2018.

The slowdown in production of milk is mainly due to a decline in cattle investment because of higher maintenance cost. Apart from this, there has been no alteration in farm gate prices in lately which has the businesses less profitable.