New Delhi: With milk prices shooting up, the government today decided to scrap the incentive on export of skimmed milk powder (SMP) to boost domestic supply and cool prices.

With possibility of shortage of fodder in view of deficient monsoon affecting milk production, the Cabinet Committee on Economic Affairs (CCEA) today decided to withdraw 5 per cent incentive offered to SMP exporters.

Sources said that this decision was taken at a CCEA meeting, headed by Prime Minister Narendra Modi, this evening.

In June 2012, the previous government had lifted the ban on SMP exports and included this product under Vishesh Krishi and Gram Udyog Yojana under which exporters can avail five per cent duty credit scrip on export value.

All the major milk suppliers, including Amul and Mother Dairy, had raised prices of various varieties of milk by Rs 2 per litre to Rs 34-48 per kg in the national capital. A similar increase was seen in other metros.

Reacting to the development, Amul Managing Director R S Sodhi said, “The move will not have much impact as international prices of SMP are higher than the domestic rates.”

He said the country exported about 1.2 lakh tonnes of SMP in 2013-14 fiscal for about Rs 3,000 crore. However, he said that the exports are low due to bullish domestic prices.

Kwality Ltd director R S Khanna also said the withdrawal of incentive will hardly have any impact as there is not much exports of skimmed milk powder taking place.

Milk production in India, the world’s largest producer, stood at 132 million tonnes in 2012-13.

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