Dairy Farmers Face Financial Crisis Due to Unpaid Dues

Makwanpur. Dairy farmers in Makwanpur have complained of facing a severe financial crisis due to non-payment of approximately Rs 143.5 million for milk sales. According to the District Dairy Producers Cooperative Union Makwanpur, which collects milk from farmers, some industries have been withholding farmers' payments since 2078 BS.

According to Damodar Adhikari, manager of the cooperative union, 11 dairy industries operating in Makwanpur owe farmers a total of Rs 143,563,490. He stated that Shubha Dairy Industries Pvt. Ltd. located in Ward No. 9 of Hetauda Sub-Metropolitan City and Gayatri Dairy Industries Pvt. Ltd. in Hetauda-2 alone owe farmers more than Rs 110 million in arrears.

According to him, Shubha Dairy Industries Pvt. Ltd. owes farmers the most, with Rs 67,076,400 remaining unpaid, while Gayatri Dairy Industries Pvt. Ltd. owes Rs 44,944,873. He said that these industries have been withholding farmers' payments since Jestha 16, 2082 BS.

Similarly, Syarshekalika Dairy owes Rs 10,616,463, Kalpavriksha Dairy Pvt. Ltd. owes Rs 6,557,336, Pavitra Milk and Foods Pvt. Ltd. owes Rs 4,331,045, and S.K. Dairy Industry owes Rs 2,528,707. Bhutandevi Dairy Firm owes Rs 2,233,779, Anushree Suppliers owes Rs 1,975,992, Kabita Dairy and Juice Industry owes Rs 1,242,566, Narayani Milk and Foods Pvt. Ltd. owes Rs 1,032,610, and Pizza Cutter Pvt. Ltd. owes Rs 723,719 to the farmers.

'Milk on Credit, Sold for Cash' Injustice to Farmers

Farmers who rely on milk sales for their livelihood say they are struggling to meet daily expenses due to the long-delayed payments. They complain that with rising production costs and no payments, farmers are on the verge of drowning in debt.

According to Hari Prasad Kandel, chairman of the District Dairy Producers Cooperative Union, the practice of industrialists buying milk from farmers on credit but selling it for cash in the market is an injustice to the farmers. He said that this practice by the industries is demoralizing the farmers and pushing them to abandon the profession.

The District Administration Office, Makwanpur has directed to pay 65 percent of the outstanding amount to the farmers by the upcoming Ashadh. After a multi-stakeholder discussion, the administration office has directed the industries withholding payments to dairy farmers to compulsorily pay at least 65 percent of the outstanding amount by the end of Ashadh.

“Industries collect milk produced by farmers through hard work morning and evening. It is sold to consumers in cash, but farmers do not receive money for months,” Kandel said. “This is demoralizing farmers. Some are even at the point of quitting animal husbandry. Due to non-payment, farmers are facing problems in purchasing animal feed, veterinary treatment, and managing daily household expenses.”

According to Chairman Kandel, many farmers are forced to take loans, and some are even preparing to sell their cows and buffaloes. He said that about 11,000 farmers are involved in the dairy business in Makwanpur. Transactions are conducted with 42 dairy industries through the District Dairy Producers Cooperative Union, but the payment problem has been escalating in recent years.

Directed to Pay 65 Percent by End of Ashadh and Clear Dues by End of Ashoj

Meanwhile, the District Administration Office, Makwanpur has directed to pay 65 percent of the outstanding amount to the farmers by the upcoming Ashadh. On Monday, after a multi-stakeholder discussion, the administration office directed the industries withholding payments to dairy farmers to compulsorily pay at least 65 percent of the outstanding amount by the end of Ashadh.

The remaining amount must be paid in full by the end of Ashoj, said Basanta Adhikari, Chief District Officer of Makwanpur. He stated that if the agreement is not implemented, the administration will proceed according to the law.

“If payment is not made within the stipulated deadline, action will be taken by the administration. The government is positive about promoting industries, but the rights of farmers will not be compromised,” he said.

On the other hand, during the discussion, the industrialists stated that they are facing cash flow difficulties because butter, cheese, and other dairy products remain in stock for a long time and there are problems in marketing. They claimed that they are unable to pay farmers on time due to dairy products remaining in stock in the market for a long time.

According to Srijan Koirala, operator of Gayatri Dairy Industries Pvt. Ltd., the main reason for the outstanding dues to dairy farmers in Makwanpur is the continuous trade deficit faced by the dairy industry. He admitted that payment delays are due to market problems.

According to Gyanraj Lama, head of Shubha Dairy Industries Pvt. Ltd., delays in payment to farmers are due to international markets and long production cycles. He argued that their work nature is different as they are cheese producers.

According to him, the cheese production process is long, so immediate cash flow is not possible. He said that cash management problems arise because it takes time for money to return after sending products to the international market.

Lama mentioned that the industry has faced crises such as the blockade, the Corona pandemic, and economic recession in the last 15 years, and the current international situation is also challenging.

“We do not trade in the Nepali market; our main market is international,” he said. “Cheese is not an item that can be sold the day after it is brought in. Its minimum production cycle is 90 days. Delays in payment to farmers are due to the long process of production, processing, export, and payment return. International events like the current Iran-Israel war are also affecting our market and business.”

According to Srijan Koirala, operator of Gayatri Dairy Industries Pvt. Ltd., the main reason for the outstanding dues to dairy farmers in Makwanpur is the continuous trade deficit faced by the dairy industry. He admitted that payment delays are due to market problems.

According to him, the large gap between the production cost and market price of dairy products creates financial pressure, pushing the industries towards collapse.

“It is not that we cannot pay, but there is a delay. The problem has arisen because the industry has been operating at a loss for the last three years. When producing ghee, our production cost is about Rs 830 per kg, but we cannot get more than Rs 700 when selling in bulk in the market,” he said.

Koirala claims that they are currently selling at a loss of about Rs 150 per kg. He said the situation was even worse in previous years.