India looks to tap NZ dairy know-how in trade deal

India's Commerce Minister has urged Kiwi dairy giant Fonterra and India's Dairy Association to form a stronger relationship. File photo / Sarah Ivey

India's Commerce Minister wants to tap into the New Zealand dairy industry's state-of-the art technology as part of a free-trade deal between the two countries.

Shri Anand Sharma has urged Kiwi dairy giant Fonterra and India's Dairy Association to form a stronger relationship.

"India and New Zealand have a long-standing and positive bilateral relationship. The two economies are essentially complementary and there is considerable potential to increase bilateral trade," Shri Sharma told a business luncheon during Prime Minister John Key's four-day official visit to India.

"It's time to give depth and width to our partnership.

"India is looking forward to partner with New Zealand in infrastructure sector, agri-food processing, renewable energy and IT.

"India's growing dairy sector is concerned that the forthcoming free-trade deal will reduce tariffs on imported New Zealand dairy products too quickly for the local industry to absorb."

The Indian Dairy Association has signalled its intention to influence the shape of any agreement between its country and Australia and New Zealand, saying free trade would jeopardise India's problem-ridden domestic milk and products sector.

"The proposed free-trade agreements with Australia and New Zealand are being signed without realising its impact on livestock production in India. It will jeopardise the sector," said association president N. R. Bhasin. India has placed dairy products on its list of sensitive items and monitors their imports - which have been rising - to assess the impact on the domestic sector.

India launched a "White Revolution" in its second National Dairy Plan. An earlier project - Operation Flood - resulted in Indian milk production increasing from 21.2 million tonnes in 1970 to 104.8 million tonnes in 2008.

But the Dairy Association says development of the sector has slackened. The association's website points to annual increases in milk production of about 3 per cent, outstripped by increasing demand running at 4-5 per cent annually because of growth in population and consumer purchasing power.

The upshot is that the gap between production and demand is widening, resulting in lower availability and increase in the cost of milk.

Milk-price inflation has been running at 17.76 per cent in the past year. The upsurge in dairy prices started in the last quarter of 2010.

At the Key luncheon, Shri Sharma said India had identified several areas of possible bilateral co-operation, including post-harvest technologies, logistic management for the agriculture and renewable-energy sectors, tourism, films (including animation films), pharmaceuticals and education.

India and New Zealand trade has more than trebled between 2004-05 and 2010-11.

In 2010-11, Indian exports to New Zealand were US$191.39 million ($231 million) and Indian imports from New Zealand were US$621.55 million.

Total bilateral trade was about US$812.94 million and grew 7.83 per cent over the previous year.