Page 5 - Dairy Dimension - July Aug 25
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| Volume 1 | Issue 5 | July-Agu 2025  MARKET UPDATE                             | Volume 1 | Issue 5 | July-Agu 2025


 GST Reset: A Defining Moment   Crucially, these reforms arrive ahead of the
           festive season – traditionally a peak period for
           ghee, paneer, and sweet-making ingredients.
 for India's Dairy Sector  For organised players, this is an opportunity to
           consolidate market share from the fragmented
           unorganised sector.
           Outlook: Towards Inclusive Growth
 A Structural Shift in Taxation  emphasised the dual benefit:
           The GST reset should be seen as more than
 On 3 September 2025, the Goods and Services Tax (GST)   “This move makes commonly consumed items more
 Council ushered in a landmark reform for India's food   affordable in price-sensitive areas, while also giving   fiscal policy. It is a lever for:
 and dairy industry. The new structure rationalises the   farmers better income stability and the confidence to   ·   Nutritional security – improving access to
 earlier four-tier system into a streamlined two-slab   invest in cattle care and feed. Over time, this uplift   protein and calcium across socio-economic
 regime, with essentials largely brought under nil or 5%   translates into a better quality of life for dairy farming   strata.
 GST. For dairy, the impact is immediate and far-reaching:  families.”  ·   Farmer empowerment – generating stable

 ·   Paneer (pre-packaged) and UHT milk are now exempt   With over 80 million dairy farmer households engaged in   demand and incentivising better   consumers, it means more milk, paneer, ghee, and
 (0%).  production, even a modest rise in branded consumption   productivity.  butter at fairer prices. For farmers, it offers stability and

 ·   Ghee, butter, butter oil, and cheese have moved   strengthens procurement networks, ensures offtake,   ·   Formalisation – narrowing the grey market and   reinvestment in productivity. For businesses, it
 from 12% to 5%.  and underpins farmer livelihoods.  strengthening consumer trust in quality.  represents a structural advantage in building stronger
                                                               brands and supply chains.
 ·   Other value-added dairy categories such as ice cream   Formalisation and Supply Chain Gains  ·   Sector expansion – unlocking higher volume growth,
 have also been reduced to 5%.  India's dairy sector has long operated in two parallel   which analysts expect to outpace the broader FMCG   The new GST regime is therefore not just a tax reform –
 This reset is more than a tax cut; it is a recalibration of   streams: a vast informal supply chain with low   market in the medium term.  it is a catalyst for the next phase of India's dairy
                                                               ascendancy, where affordability, quality, and inclusivity
 affordability, competitiveness, and sectoral   compliance but attractive pricing, and a formal branded   India's dairy economy, valued at nearly INR 19 trillion, is   converge to reshape both demand and supply.
 formalisation.  market competing under higher tax and regulatory   entering a new cycle of affordability-driven growth. For
 costs. The GST rationalisation narrows this gap, creating
 Affordability and Consumer Access
 an inflection point for formalisation.
 For the average Indian household, dairy staples are non-
 negotiable. Even a 5–7% price reduction changes   Deepak Jolly, Chairperson of the Indian Food & Beverage
 purchasing behaviour. The zero-rating of paneer and   Association (IFBA), framed the change as:
 UHT milk, and the halving of GST on ghee and butter, will   “A watershed moment that simplifies compliance,
 ease monthly grocery bills across income groups.  expands affordability, and encourages innovation across
 the food and beverage sector.”
 Mrs. Bhuvaneswari Nara, Vice Chairperson and
 Managing Director of Heritage Foods, noted:  By levelling the field, the reforms are expected to:
 “These essentials touch nearly 100% of Indian   ·   Draw more consumers into the formal sector,
 households. The reforms not only lighten the monthly   improving food safety and trust.
 grocery bill but also allow branded products to compete   ·   Reduce incentives for tax evasion and adulteration.
 more effectively with unorganised players. Heritage   ·   Encourage investment in distribution, cold chain, and
 Foods will pass on the full benefit to consumers and   farmer extension services.
 scale capacity to capture the expected market   For processors, the shift also means scale economics:
 expansion.”
 higher volumes across paneer, ghee, and butter allow
 Such measures directly address the protein and   tighter integration of procurement, logistics, and retail
 nutrition gap in India, making high-quality dairy more   distribution, further lowering costs.
 accessible to families that had previously cut back or   Strategic Implications for Dairy Businesses
 substituted with inferior alternatives due to cost
 pressures.  The tax relief provides headroom for companies to
 Rural Multiplier Effect  reinvest in capacity, innovation, and farmer
 development. Heritage Foods has already confirmed
 The most profound growth is likely to occur in semi-  capacity ramp-ups, while others such as Parag Milk
 urban and rural India, where dairy consumption is   Foods are focusing on strengthening farmer linkages.
 deeply embedded in diets but constrained by price   Dairy boards and cooperatives are expected to leverage
 sensitivity. A few rupees saved per litre or per packet can   lower tax incidence to expand branded portfolios and
 unlock substantial incremental demand.  upgrade infrastructure such as chilling centres and
 Devendra Shah, Chairman of Parag Milk Foods,   packaging lines.



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