As we approach the mid-year mark of 2025, the Indian dairy sector stands at a pivotal juncture, navigating evolving domestic demands alongside complex global dynamics. A significant legal development has recently emerged, impacting stakeholders across the dairy value chain-farmers, processors, consumers, and policymakers alike.

In a landmark ruling, the Hon'ble Andhra Pradesh High Court sided with Dodla Dairy Limited, a prominent dairy enterprise and proactive Institutional Member of the Indian Dairy Association (IDA). The court held that flavoured milk should be classified under GST Tariff Heading 0402 99 90, pertaining to milk and cream, thereby attracting a 5% GST. This contrasts with the previous classification under Heading 2202 99 30, applicable to non-alcoholic beverages, which imposed a 12% GST rate.

This decision not only provides tax relief but also acknowledges flavoured milk as a dairy product rather than merely a beverage. Scientifically and nutritionally, flavoured milk is pasteurized milk with added permitted flavours and sometimes sugar, retaining all inherent qualities of milk. Despite this, several tax authorities had previously classified it differently, leading to significant compliance burdens for dairy processors.

The Supreme Court of India further reinforced this stance by dismissing an appeal from the Revenue Department against the Andhra Pradesh High Court's ruling. The apex court's decision affirms the classification of badamflavoured milk under Entry 0402 9990, attracting a 5% GST. This aligns with earlier judgments, such as the Madras High Court's ruling in the Parle Agro case, which also categorized flavoured milk under HSN 0402.

These judicial decisions set clear precedents that could resolve multiple pending litigations, benefiting the entire dairy industry. The IDA has long advocated for consistent classification of value-added dairy products to ensure fair taxation. This judgment affirms our position and provides a much-needed boost to the growing valueadded segment, including fortified milk, probiotic dahi, dairy-based beverages, and more.

We will continue engaging with the GST Council and the Ministry of Finance to bring uniformity and clarity across the taxation framework for dairy products. Such measures are vital to drive innovation and value addition in the sector.

June 2024 witnessed a significant development in consumer pricing with major cooperatives such as Amul and Mother Dairy announcing a Rs. 2 per litre increase in milk prices across all variants-full cream, toned, double-toned, and standard milk.

This decision was not taken lightly. It came after months of cost escalation across the dairy value chain:

• Cattle feed costs, particularly those of maize, soybean meal, and cottonseed cake, have seen a sharp increase due to inflation and erratic monsoons.
• Fodder availability has been severely impacted by climatic changes, with several states experiencing drought-like conditions in pockets.
• Diesel price volatility has pushed up the cost of milk procurement, chilling, and transportation.
• Packaging materials and energy expenses have also seen inflationary pressures, adding to the operational burden of processors.

Despite these challenges, cooperatives have continued to prioritize farmer remuneration, passing on approximately 80 paise of every rupee collected from consumers back to the milk producers. This is a globally unmatched model that ensures inclusive growth, sustains rural livelihoods, and encourages farmers to continue investing in quality milk production.

It is important to note that even with this price hike, Indian milk remains among the most affordable in the world when adjusted for nutritional value and purchasing power parity. As a sector, we remain committed to balancing farmer interest and consumer affordability, ensuring long-term sustainability.

As you may be aware, India has recently entered into advanced stages of bilateral trade negotiations with the United States, and dairy has once again emerged as a sensitive and strategic area of discussion.

Let me underline why dairy must be treated with utmost caution in trade agreements:

• India's dairy sector supports over 100 million rural households, a majority of whom are small and marginal farmers. Over 70% of dairy workers are women, making dairy a powerful vehicle for gender empowerment and rural upliftment.
• The US dairy industry is heavily subsidized, consolidated, and industrialized. Opening Indian markets to low-cost imports could severely disrupt our fragile yet resilient ecosystem, leading to loss of farmer income and long-term decline in milk production.
• Cultural sensitivities matter. Indian regulations, backed by religious beliefs, prohibit the use of animal rennet or certain feed practices that are common in some other countries. Our food safety and labelling regulations are among the strictest in the world and must be respected in trade dialogues.
• History has shown that premature liberalization without adequate protection or capacity building leads to long-term damage. We must learn from global examples where local producers were wiped out due to subsidized imports.

We sincerely hope that the Government of India will consider these recommendations and ensure that the interests of our dairy farmers are safeguarded.

Despite the challenges of climate variability, volatile markets, and global trade pressures, the Indian dairy industry remains a beacon of hope and resilience. Our consistent growth-averaging 5-6% annually in production-is a testimony to the spirit of our farmers and the robustness of our cooperative and private-sector models.

However, this is not the time for complacency. As we look ahead, our focus must be on:

• Improving productivity per animal through better genetics, nutrition, and veterinary care.
• Promoting green and climate-resilient dairying with lower methane emissions, improved water use, and circular economy models like biogas from dung.
• Investing in research and innovation for new product development, shelf-life extension, and healthenhancing dairy products.
• Expanding milk consumption among children, urban poor, and nutritionally vulnerable groups, using milk as a tool for better public health.
• Creating more opportunities for women entrepreneurs in dairy processing, marketing, and service delivery.

The IDA will continue to work collaboratively with government bodies, industry partners, academic institutions, and farmer organizations to realize this vision.

The first half of 2025 has demonstrated that while the dairy sector is under pressure from multiple sides-costs, climate, and competition-we have the institutional strength and community resolve to emerge stronger.

Let us remain united in our efforts to keep the dairy sector vibrant, inclusive, and future-ready. We have a long journey ahead, but with clear focus and collective will, I am confident that we will continue to serve as a model for sustainable agriculture and rural development not only in India but across the world.