Dairy items’ potential price hikes will see low demand

With liquid milk subject to the 18 per cent value-added tax, consumers should expect a potential price increase in related dairy items.

Earlier, the VAT was only applicable to powdered milk. In the past month, a litre of liquid milk has gone up in price by Rs. 30 and Rs. 50. “Butter, cheese etc. are already up in price. There would be further increases,” a dairy producer said.

Conversely, market analysts point out that too many price increases in too many short periods will kill the market. As an example, in the malt category when prices were skyrocketing, people decided they could live without it. “Similarly, cheese and other items like that will not be consumed as frequently going forward,” an analyst pointed out.

He said that already demand for these types of so-called luxury items is waning. “In modern trade outlets like supermarkets, we see that there are promotions for these items. Greek yoghurt, which is an item that has been in the market, has shot up in price four times in the past few years. Now we don't see it as much,” he added.

In a concerning turn of events, producers and farmers are grappling with soaring production costs, which have risen by a staggering 300 per cent compared to the previous year. The cost of shipping goods and supplies has surged due to a variety of factors, including fuel price increases and logistical challenges brought on by a strained transportation network.

Most producers said that they would be writing to the government to rethink the VAT of 18 per cent on liquid milk.