Nepal's Dairy Sector Clears Payment Backlog Amidst Economic Challenges

The state-owned Dairy Development Corporation (DDC) in Nepal has addressed the issue of delayed payments to dairy farmers, clearing dues up to mid-January with payments totaling Rs1.48 billion made in the first six months of the current fiscal year. The corporation utilized internal resources to manage these payments. Despite this progress, approximately Rs320 million remains to be paid to farmers, which the DDC aims to clear by March, coinciding with an expected rise in demand for dairy products.

The DDC managed to reduce its liabilities by selling off accumulated stocks of butter and skimmed milk powder. Previously, unsold inventory had put a strain on cash flow, causing significant payment delays that affected farmers for up to nine months. Many farmers rely on milk sales for essential expenses such as school fees and medical bills.

Currently, the DDC collects between 95,000 and 100,000 litres of milk daily from farmers, with procurement costs around Rs180 million. This milk is processed into various dairy products for domestic consumption. Private sector operators have also reported improvements in the payment situation.

Nepal experiences two milk production cycles: the flush season and the lean season, with a production ratio of approximately 1:3. During the flush period, from August to February, milk output increases, often resulting in oversupply. Conversely, the lean months see a 30 to 40 percent milk deficit.

Despite these improvements, dairy producers express concerns that the sector remains a low priority in national politics, especially with upcoming general elections. Industry leaders highlight the lack of focus on agriculture and livestock issues in political manifestos.