Minister announces scope of shake-up

A Government discussion paper on the future of the dairy industry says most of the rules governing it are still relevant but change is on the horizon.

Primary Industries Opposition spokesman Nathan Guy said while it was a wide-ranging review, it would not be the last word on the matter.

‘‘We’ll be talking about DIRA (Dairy Industry Restructuring Act) for another 12 months and the true politics will be played out in Cabinet. Shane Jones has openly talked about splitting Fonterra apart.

‘‘There’s nothing specific in this document about splitting it but that’s where the Government may want to take it,’’ Guy said.

The discussion document on DIRA has found:

DIRA is still effective at managing Fonterra’s dominance;

It does not encourage inefficient industry growth or prevent Fonterra from pursuing a valueadd strategy;

It prevents Fonterra from managing farmers’ environmental performance;

It provides access to regulated milk for large dairy processors for whom it may no longer be necessary.

DIRA was instrumental in the creation of Fonterra in 2001 and continues to ensure the dairy giant does not take advantage of its market dominant position.

Minister of Agriculture Damien O’connor said while dairy growth had been good for the economy, with dairy export receipts more than doubling in value since 2001, there had been a downside.

‘‘The growth of the dairy industry has had negative effects on our environment.’’

One of the contentious issues facing the industry is the question of open entry, whereby Fonterra has to accept all applications by farmers to become shareholders.

The discussion paper offers three options: the status quo; a repeal of open entry; or amending it so Fonterra could reject an application to become a shareholder if the applicant was unlikely to comply with its terms of supply.

The paper said environmental regulations had not significantly constrained the growth in dairying, which had increased pressures on the environment.

The resulting impacts had not been borne by farmers or dairy companies, but by society as a whole.

The deadline for submissions on the paper is February 8, with final recommendations to the Government in April, followed by law changes late next year.