Insights & Updates: Government of India on the Dairy Industry

In the sprawling landscapes of rural India, amidst the tranquil countryside and bustling markets, a quiet revolution is underway. The Indian dairy industry, long hailed as the backbone of the country’s agricultural economy, is experiencing a transformative shift propelled by innovative government initiatives. As the nation strives to meet the growing demand for dairy products, new policies and programs are paving the way for unprecedented growth and prosperity. In this article, we delve into the dynamic landscape of India’s dairy sector, exploring how government initiatives are igniting a dairy revolution and driving economic empowerment across the nation.

We have seen precedence of these initiatives while the Union Budget for the Indian Dairy Industry for the fiscal 2025 was announced on February 01, 2024. However, the implementation of the same has started rapidly. If you remember, our Hon. Finance Minister, Ms. N. Sitharamana stated that the productivity of milch animals is of great concern in India. Additionally, she also expressed that the ongoing schemes targeting the upliftment of the Indian Dairy industry will get additional focus and active implementation streams. 

The good news is that the implementation streams are active. Let us know about the latest two greatest announcements this month!

On February 14, 2024, Parshottam Rupala, the Union Minister for Fisheries, Animal Husbandry, and Dairying, relaunched the Animal Husbandry Infrastructure Development Fund (AHIDF) Scheme with a realigned budget of Rs 29,610 crore. The minister stated that the scheme, which was originally implemented during the COVID-19 period, has been modified and will be extended for another three years.

Who will Benefit?

With an increased outlay from Rs 15,000 crore to Rs 29,610 crore, the industry, farmer producers organizations (FPOs), and dairy cooperatives will gain significant benefits from the scheme.

The minister stated that a plan is in place to help dairy cooperatives upgrade their processing infrastructure with cutting-edge technology. This venture will significantly benefit a significant portion of the nation’s milk producers.

How does the Announcement align with the Union Budget 2024 Declaration?

At a meeting on February 1, the Union Cabinet approved a significant realignment of the Animal Husbandry Infrastructure Development Fund (AHIDF) under the Infrastructure Development Fund. This move involves an increased outlay of Rs 29,610 crore, nearly double the initial Rs 15,000 crore allocated to the Dairy Infrastructure Development Fund (DIDF), which has now merged with the AHIDF.

Main Highlights of the New Scheme

• Under the AHIDF program, dairy cooperatives will now receive an increased interest subvention of 3% for up to 8 years, replacing the previous 2.5% offered under the DIDF program.
• The Dairy Cooperative will receive credit guarantee assistance through the Agricultural and Horticultural Development Fund’s Credit Guarantee Fund.
• Credit guarantee cover up to 25% of the term loan without any ceiling on the loan amount.
• Loan up to 90% of the estimated/actual project cost dovetailing with capital subsidy schemes of other ministries or state-level schemes.
• Ease of application process through an online portal.

The government has provided specific tax exemptions to dairy cooperatives under the Income Tax Act to invigorate the dairy sector.

In a notable initiative designed to bolster the dairy industry, the Government has introduced several measures in the Interest Tax Act for Cooperative Societies. These measures include income tax exemptions and reductions. Shri Parshottam Rupala, the Union Minister of Fisheries, Animal Husbandry, and Dairying, stated this in a written reply made in the Lok Sabha.

Key Highlights of the Announcement for Indian Dairy Industry

Deduction under Section 80P

Under Section 80P of the Income Tax Act of 1961, the whole profit the Primary cooperative societies earn by supplying milk to Union societies can now be claimed as deductions.

Surcharge Reduction

For cooperative societies with incomes between Rs. 1 crore and Rs. 10 crore, the surcharge decreases from 12% to 7%.

Alternate Minimum Tax Reduction

In line with the corporate tax rate, the Alternate Minimum Tax rate for cooperative societies has been reduced from 18.5% to 15%.

Amendment to Section 269T

The recent amendment to Section 269T of the Income Tax Act has brought significant relief. This relaxation is for Primary Agricultural Credit Societies (PACS) and Agricultural and Rural Development Banks (PCARDBs). Under the new provisions, cash repayments made by these entities will not incur any penal consequences. However, this is applicable as long as the amount is less than Rs. 2 lakhs. Note that, this is a substantial increase from the previous limit of Rs. 20,000.

Enhanced TDS Limit

Co-operative societies have a higher threshold of Rs. 3 crore for Tax Deducted at Source (TDS) on cash withdrawals, surpassing the Rs. 1 crore limit applicable to other entities, as specified in section 194N.

Interest Subvention for Farmers

Farmers can avail interest subsidy on short-term crop loans up to Rs. 3 lakhs from the government. The annual interest rate is a competitive 7%. Moreover, timely loan repayments will gain an additional 3% interest subsidy. Therefore, this effectively reduces the interest rate to a mere 4%.

Kisan Credit Card (KCC) Scheme

To support farmers involved in animal husbandry and fisheries, the government established the Kisan Credit Card ( KCC ) scheme in 2018-19. Each beneficiary is eligible for short-term working capital loans up to Rs. 2 lakhs, aligning with short-term crop loans.

Minister Rupala underlined the significance of these initiatives in providing a substantial impetus to the dairy sector. He emphasized their role in enhancing the financial well-being of cooperative societies engaged in dairy activities.

The Bottomline

From these two announcements, it is very clear that the Indian Dairy Industry is attracting greater and higher attention. The government’s current objectives include increasing sales of milk and dairy products. Additionally, modernizing dairy processing facilities and marketing infrastructure is also on the priority list.

However, to achieve this objective, it is very necessary to boost the productivity of the milch animals. India is a leading milk-producing nation in the world. Also, it is the largest consumer of the same. Due to this, the nation is losing a great amount of income from the export of milk and dairy products. This is because a major portion of the volume produced is consumed within the nation itself.
As a leading milk processing plant in India, we understand the market dynamics of the dairy industry. Therefore, to benefit the most from the Indian dairy industry, the government should focus on boosting milk production. We know that it is ongoing, but more productivity and output are expected. The surplus milk production can generate a greater volume of revenue through exports.

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Created on Feb 21st 2024 03:32. Viewed 91 times.

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