India never offers any duty concessions in dairy sector under FTAs: Goyal

What Happened

• In the context of the India–New Zealand FTA signing, the Ministry of Commerce clarified that India has not offered and will not offer any duty concessions in the dairy sector under any Free Trade Agreement — including those with the EU, UK, New Zealand, and Australia.
• Despite this overarching protection, the India–New Zealand FTA includes narrow, conditional provisions on specific dairy-adjacent products: limited duty reductions for albumins and bulk infant formula under a quota system with minimum import price safeguards.
• A processing arrangement allows foreign firms to import raw dairy materials, process them into finished products in India, and re-export 100% of output — with no domestic sales permitted.
• Phased tariff elimination (over seven years) has been agreed for bulk infant formula, certain dairy preparations, and peptones.
• The protection policy reflects India's dairy sector structure: dominated by small and marginal farmers, most with only one to two milch animals, for whom dairy income is a primary livelihood source.

Static Topic Bridges

India's Dairy Sector: Scale, Structure, and Operation Flood

India is the world's largest milk producer, accounting for approximately 22–24% of global milk output. This position was achieved through Operation Flood (1970–1996), the world's largest dairy development programme, launched by the National Dairy Development Board (NDDB) under the cooperative model pioneered by Amul in Anand, Gujarat. Operation Flood transformed India from a milk-deficit nation into a surplus producer, creating the "White Revolution."

The structural characteristic of Indian dairying is its fragmentation: approximately 70% of milk production comes from farmers with only one to two milch animals. Most dairy farmers are marginal or small agricultural households for whom milk sales represent a daily income stream — distinct from seasonal crop income and critical for rural financial resilience. An estimated 80 million farm households are involved in dairying.

Why India's Dairy Cannot Compete on FTA Terms

New Zealand is among the world's most efficient dairy producers, with large commercial farms, high mechanisation, and grass-fed year-round grazing that significantly reduces production costs. New Zealand's Fonterra cooperative controls approximately 30% of global dairy trade. The EU is also a massive dairy exporter with extensive farm subsidies under the Common Agricultural Policy (CAP). Indian dairy production costs are higher per litre for smallholders, but the sector provides livelihoods at a scale that no import surge could compensate for.

Selective Concessions: Infant Formula and Processing Provisions

While bulk dairy (fluid milk, cheese, butter, SMP) remains fully protected, the India–New Zealand FTA made a limited exception for high-value specialised nutrition products. Bulk infant formula and certain dairy-based preparations (classified under HS Codes for food preparations) have been granted phased tariff elimination over seven years, with minimum import price safeguards to prevent dumping. These are "B2B" (business-to-business) inputs for value-added manufacturing, not retail consumer products competing directly with domestic milk.

The processing arrangement — allowing 100% re-export of processed dairy products — positions India as a potential hub for high-value dairy processing using imported inputs, generating foreign exchange and employment without introducing dairy products into the domestic consumer market.

Key Facts & Data

• India: world's largest milk producer; ~22–24% of global milk output
• Operation Flood launched: January 13, 1970, by NDDB; concluded 1996
• NDDB established: 1965 at Anand, Gujarat
• Approximately 80 million farm households involved in dairying in India
• 70% of India's milk from farmers with 1–2 animals
• India's dairy cooperatives: 1,73,000+ village societies
• New Zealand Fonterra: controls approximately 30% of global dairy trade
• India's MFN dairy tariffs: approximately 30–60% (sector-specific)
• FTA dairy concessions: nil for consumer dairy; limited to bulk infant formula, albumins, dairy preparations under phased schedule (7 years) with MIP safeguards
• Processing arrangement: 100% re-export of processed dairy products (no domestic sale)
• Dairy and animal husbandry: approximately 4–5% of India's GDP
• India has maintained zero dairy concessions in all FTAs: UAE, Australia, UK, EU, and New Zealand