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India is facing milk shortages of up to 3 million tonnes a year as it struggles to feed a rapidly expanding middle class, according to

India’s National Dairy Development Board has forecast milk demand to hit 180-200 million tonnes by the end of 2020.

The report said: “While this is a challenge for the Indian government, it gives Australian milk processors a ”great growth story”, and trans-Tasman company Fonterra already has its eyes firmly on the prize.”

Australian dairy exports to India have soared 70% in the past 10 years, according to National Australia Bank figures.

Indian exports are worth about AUD$200 million annually to Fonterra, which supplies milk powders and pharmaceutical-grade lactose among other dairy products.

But trade strategy manager James McVitty said Australia and New Zealand could only supply a ”small slice” of India’s booming milk demand. Trans-Tasman milk production totals almost 30 million tonnes a year, compared with India’s 112 million tonnes. India’s import taxes are also high, between 20-60%.

”The vast majority of that demand growth in India will have to be met by their own growth in local milk production,” McVitty was quoted saying.

The report said Fonterra is partnering with the Indian Farmers Fertiliser Co-operative and Global Dairy Health to complete the feasibility study. The trio hope to establish a pilot farm for 3000 cows, at a reported cost of $40 million.

India’s National Dairy Development board is understood to be supportive of the deal.

The World Bank granted the board almost $4 billion to streamline India’s fragmented dairy sector. There are about 70 million dairy farmers in the country, milking an average of two cows each, and of that milk about 20% is formally processed. The other 80% is consumed on the farm or in the local village.

National Australia Bank agribusiness economist Michael Creed said improving farm productivity could ease milk shortages in developing countries.

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