“This is the toughest decision I have ever made,” confessed Sunil Dissanayake, a 54-year-old dairy farmer residing in Polonnaruwa, as he reluctantly parted ways with his herd of cows, thus concluding a family legacy spanning nearly six decades.

The heartbreaking decision was prompted by persistent challenges, particularly soaring expenses related to electricity, animal feed, and fertilisers. Dissanayake expressed his confusion, stating: “I can’t understand why anyone would choose to continue under these circumstances.”

Regrettably, Dissanayake’s plight is not an isolated case. Speaking to The Sunday Morning, All Ceylon Farmers’ Federation (ACFF) President Namal Karunaratne said that almost all farmers across the country were suffering due to high costs of electricity, fuel, animal feed, vitamins, minerals, and other essential equipment.

“The dairy sector is one of the main sectors in the agricultural landscape in Sri Lanka. Yet, it is also the most forgotten area. The Government had no proper plan to enhance dairy products. Millions of rupees have been wasted over the past several decades, but the Government has failed to meet even the local dairy requirement,” he lamented.

As Karunaratne explained, many farmers had already left the sector. There had been no development, especially since 2019. The Government was now planning to sell the remaining farms, Karunaratne alleged, claiming that dairy farming was currently being discouraged.

“Almost all these farms will be sold to India and India will take control of Sri Lanka’s dairy sector. Large-scale private companies have already come to Sri Lanka and feasibility is being studied. The necessary Cabinet papers have also been submitted and approvals have been obtained to open up the dairy sector for investments. Indirectly, while discouraging local dairy farmers, the Government is trying to sell the dairy sector,” Karunaratne stressed.

Local dairy industry

Sri Lanka currently produces about 40% of its milk demand domestically and is therefore heavily dependent on imports to meet demand. Dairy is a high-potential agro-industry mainly carried out by smallholder farmers in Sri Lanka.

As per the statistics revealed in the Milk and Milk-Based Products Sector Overview of the Ministry of Industries, for the last five decades, milking trends and milk production of cows and buffaloes have increased over the years.

It states that there is great potential to increase milk production from buffaloes in Sri Lanka. Local small-scale dairy processing should be encouraged by promoting the use of products from these local producers when the prices of milk products increase in the international market.

Cow milk production is the main factor controlling the dairy industry in Sri Lanka. According to Government statistics, production in 2022 was 506 million litres. Although declining trends have been observed on several occasions, overall cow milk production has recorded positive growth. 

In the last decade, especially after 2008, there has been remarkable growth in cow milk production. The National Livestock Development Board’s (NLDB) Ridiyagama Farm has become the largest dairy farm in Sri Lanka with an annual production capacity of 10 million litres of milk since 2016 after importing 2,500 cows.

Increasing costs 

In such a backdrop, a senior official of the NLDB who wished to remain anonymous stressed that the new taxes to be introduced from next year would further aggravate the issues faced by the industry.

“For instance, the dairy sector is heavily dependent on machinery, especially in large-scale farms, and this equipment is subject to new taxes. The equipment uses rubber items and we have to pay taxes for those items,” the official stressed. “The cost of some machines has gone up to around Rs. 370,000 from Rs. 100,000.”

“In Sri Lanka, there are only 1.2 million dairy cows and the number of dairy farmers is 1.1 million. How can an industry survive at this rate? The cost of production has doubled over the past several months,” the official charged.

“Overall, nearly 37% of the production cost is for maize. Maize is one of the most important ingredients to ensure high milk production. But the tax on maize was increased to Rs. 75 from Rs. 7 a few years ago and then brought down to Rs. 25 a few months ago. Everyone praised the Government decision, but ultimately what has happened? The tax is still more than tenfold what it used to be. In parallel, the cost of production has also increased. This is why the prices have gone up drastically,” the official added.

The senior NLDB official further revealed that the tax on imported milk powder had been reduced to Rs. 2 from Rs. 45. “Sri Lanka’s annual dairy demand is going up by 10% and this is always filled by imported milk.”

Highlighting the cost of milk production, the official disclosed that a litre of milk was sold at Rs. 220-260 in large-scale farms while small-scale dairy farmers sold a litre of milk at Rs. 90-120. “When all other costs added up, the cost of a one-litre dairy milk pack has skyrocketed, making it impossible for a middle-class family to afford on a daily basis.

“There was a huge campaign promoting local milk, but it is impossible to get a packet of local milk powder or fresh milk in the market. The cost is even equal or higher to imported milk. The objective of local dairy production is to provide milk and milk-based products at an affordable price, but now it is impossible. Prices are soaring by the day,” Kanthi Perera, a 45-year-old resident of Meegoda, told The Sunday Morning.

“We can’t afford a glass of milk for all our family members in the morning, though it has been a routine for decades. Fresh milk is out of the question – it has now become a commodity of the super rich. Those days it was only cheese and butter that were considered rich people’s food, but now a glass of milk is also something that only rich people can afford,” she lamented.

New action plan promised

The agricultural sector makes a significant contribution to the country’s Gross Domestic Product (GDP), accounting for 21% of total GDP. Annual milk powder production stands at 7,387,086 kg, using 2018 as the base year.

However, in the context of the broader landscape, the reliance on imported milk powder has been noteworthy, with a substantial figure of 83,024,406 kg recorded in 2021.

In such a backdrop, when The Sunday Morning contacted Agriculture Minister Mahinda Amaraweera, he said Sri Lanka’s dairy industry would experience a massive change next year.

“We have developed a new action plan for 2024-2048. Under the new plan, development will be divided into three subcategories: short-, medium-, and long-term. Under the short-term plan, the Government aims to increase annual milk production to five million litres by the end of 2024 from the current 3.8 million litres,” he said.

The Minister also noted that all small-, medium-, and large-scale farms must be registered with the Agriculture Ministry, adding that registration would commence from January.

Commenting on the tax increase, the Minister noted that although the taxes would indirectly apply to machineries, farmers would not be replacing the machines on 1 January itself. “Small-scale farmers are not using machines at all. There is no need to increase the prices of dairy products because of the tax revisions to be introduced in January,” Amaraweera added.