Aggregate milk volumes continue to grow by 3% annually, but a compositional transition from buffalo to cow milk combined with FSSAI adulteration crackdowns has triggered an acute shortage of milk fat, leaving dairies surplus in SMP while struggling to supply ghee and butter.
India’s dairy sector is confronting a complex structural imbalance: an acute shortage of milk fat occurring alongside aggregate volume growth. In an editorial published by The Indian Express, agricultural analysts examine how the nation’s celebrated position as the world’s leading milk producer masks a compositional challenge that is driving up prices for ghee, butter, and high-fat dairy products across consumer markets.
The central paradox is that while total national milk production continues to expand at approximately 3 per cent annually over the past decade, the component profile of the milk pool has changed fundamentally. Three decades ago, indigenous buffaloes accounted for roughly 60 per cent of India’s national milk production; today, their share has dropped to barely 45 per cent.
Because standard buffalo milk averages 6.5 per cent fat and 9 per cent solids-not-fat (SNF), whereas standard cow milk averages 3.5 per cent fat and 8.5 per cent SNF, replacing buffalo milk with cow milk produces substantially less milk fat per litre collected.
The editorial highlights key structural, regulatory, and tax drivers compounding this fat deficit:
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The Component Imbalance & SMP Glut: Because cows yield higher fluid volume with lower fat percentages, processing extra cow milk to meet escalating national fat demand generates an excess of solids-not-fat. This threatens to create a structural surplus of skimmed milk powder (SMP) for which domestic demand is limited, forcing dairies into expensive inventory carryovers while fat reserves remain depleted.
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FSSAI Enforcement After Adulteration Scandals: Regulators and food safety authorities—accelerated after high-profile adulteration investigations such as the Tirupati laddu controversy—have cracked down on unscrupulous suppliers blending vegetable oils, palm fat, or animal tallow into desi ghee. While curbing “analogue” imitations has restored consumer confidence, it has redirected substantial institutional and commercial demand back into authentic, organized milk fat channels.
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GST Rationalization Accelerating Consumption: Demand for pure dairy fats received a further boost following Goods and Services Tax (GST) rate cuts, which lowered levies on ghee, butter, and cheese from 12 per cent to 5 per cent, ice cream from 18 per cent to 5 per cent, and reduced paneer from 5 per cent to zero. These tax cuts made genuine packaged dairy more accessible, widening the supply-demand deficit.
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Retail Price Repercussions: The resulting fat scarcity has led to rapid price adjustments on retail shelves. Major cooperatives like Amul and the Karnataka Milk Federation (Nandini) recently raised ghee prices—with Nandini 1-litre ghee sachets climbing from ₹715 to ₹850, and Amul adjusting ghee cartons from ₹640 to ₹680—demonstrating how fat deficits translate directly into consumer price inflation.
From an agribusiness supply-chain and dairy economics perspective, the editorial concludes that policymakers must look beyond aggregate gross tonnage metrics. As urban incomes rise and dietary preferences favor natural milk fats, balancing the national herd through targeted bovine genetics, incentivizing high-fat milk procurement pricing at the farmgate, and supporting buffalo breeding programs are essential to resolving India’s milk fat deficit before it leads to recurring market shocks.
Indian Dairy Economics & Component Deficit
India’s Milk Fat Problem: Compositional Shift
The Indian Express editorial analysis on herd evolution and dairy fat deficits.
Buffalo Share
~45%
Down from 60% (30 yrs ago)
Fat Comparison
6.5% vs 3.5%
Buffalo vs Cow baseline
Volume Growth
+3% / Year
Driven mainly by cow milk
Milk Fat Concentration Benchmark
Standard Solids Profile
Standard Solids Profile
Buffalo Milk Fat Content:
6.5% Fat (9.0% SNF)
6.5% Fat (9.0% SNF)
Cow Milk Fat Content:
3.5% Fat (8.5% SNF)
3.5% Fat (8.5% SNF)
Structural Factors Driving the Fat Squeeze
The Cow Milk Shift & SMP Surplus Risk
Meeting fat demand primarily through cow milk produces excess solids-not-fat, risking an oversupply of skimmed milk powder (SMP) while fat reserves remain tight.
Enforcement Against Analogue Fats
Regulatory crackdowns on palm oil and tallow adulteration in ghee redirect large-scale institutional and sweet-shop procurement toward pure dairy fat.
Tax Rationalization (GST Cuts)
GST reductions on ghee, butter, cheese, and ice cream lower retail friction and expand consumer demand, intensifying pressure on available fat inventories.
Source: The Indian Express Editorial Board
Agricultural Economics
Agricultural Economics
Source: The Indian Express / Harish Damodaran Analysis
eDairyNews India Agribusiness Intelligence
eDairyNews India Agribusiness Intelligence
Source: The Indian Express
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