regulatory enviroment

8/8/2019 Regulatory Enviroment

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Regulatory Enviroment in the Dairy ProcessingSector

The Indian processed dairy industry has grown and diversified enormously in the lastfew years. To ensure the proper development and growth of this industrial sector, theGovernment of India has instituted various laws and regulations. The variousregulations that govern the dairy processing industry can broadly be classified into:

Compulsory Legislation

Prevention of Food Adulteration Act, 1954

This Act is the basic statute that is intended to protect the common consumer againstthe supply of adulterated food. This specifies different standards for various foodarticles. The standards are in terms of minimum quality levels intended for ensuringsafety in the consumption of these food items and for safeguarding against harmful

impurities and adulteration. The Central Committee for Food Standards, under theDirectorate General of Health Services, Ministry of Health and Family Welfare, isresponsible for the operation of this Act. The provisions of the Act are mandatory andcontravention of the rules can lead to both fines and imprisonment.

Milk and Milk Product Order (MMPO) 1992

The Milk and Milk Product Order (MMPO), 1992, issued onJune 9, 1992 seeks to ensure the supply of liquid milk, anessential commodity, to consumers by regulating itsprocessing and distribution. Within eight years of itsoperation, the Central/State Registering Authorities have tillDecember 2000 registered 666 units with a total processingcapacity of 65.8 million litres per day (mlpd).

Salient Features of the MMPO Order include the following:-- Registrations for units handling up to 75,000 litres of milkper day are granted by the State Governments and unitswith more than 75,000 litres per day capacity are registeredby the Central Registering Authority.-- The Certificate also specifies the milkshed area, which,under the order is defined as a geographical areademarcated by the Registering Authority for the collectionof milk by the registered unit.-- Maintenance of specified hygienic conditions in thepremises where milk and milk products are handled,processed, manufactured or stored.

The collection, transportation and processing of milknormally centres around the operations of a processingplant. The region from which the marketable surplus of milk


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production finds its way to a processing plant is called a'milkshed'. The concept of milkshed areas is pivotal to theMMPO. For an orderly development of the dairy industry, aproper assignment/allocation of milkshed is critical.

The dairy industry is regulated in most countries throughvarious ways. Many subsidise part or whole of domesticproduction. Imports are commonly restricted, and exportsfrequently subsidised. High dairy price supports in manycountries are put in place to stimulate production to theextent that subsidies for exports are necessitated tomaintain domestic dairy programmes.

In the United Kingdom, all the milk produced by farmers isprocured by the cooperatives. Private dairies are required tobuy their milk requirement from cooperatives. New Zealandhas no private sector dairy plants. As many as 90 per cent of dairies in the erstwhile West Germany and 100 per cent in

Denmark, Netherlands and Sweden are in the cooperativesector.

In the United States, 70 per cent of the dairy industry iscooperative. Dairy programmes are subject to moreGovernment participation or regulation than most otherdomestic agricultural industries in the USA. There are alsoFederal Milk Marketing Orders and movement barriers in theUSA for "orderly marketing control, which is associated withstabilising fluid milk prices, providing secured anddependable markets for individual farmers producing milkprimarily for the fluid market and improving the balance of market power between farmers and handlers.

In the emerging liberalised global scenario, trade-distortingagricultural policies have been the focus of the GATTmultilateral trade negotiations. With the liberalisation of agricultural trade under the new GATT regime, the heavysubsidies prevalent in the dairy sector in the countries of theEU as well as in the USA will have to be brought down in thenext few years. The competitive advantages of the Indiandairy industry are then considered to be substantial. Withsubstantial and continued investment in building up milkproduction, India can emerge as a major exporter of dairyproducts in the next few decades.

Standards on Weights and Measures(Packaged Commodities) Rules, 1977

These Rules lay down certain obligatory conditions for allcommodities that are packed form, with respect todeclarations on quantities contained. These Rules areoperated by the Directorate of Weights and Measures, underthe Ministry of Food and Civil Supplies.


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Export (Quality Control & Inspection) Act,1963

The Export Inspection Council is responsible for the

operation of this Act. Under the Act, a large number of exportable commodities have been notified for compulsorypre-shipment inspection. The quality control and inspectionof various export products is administered through a networkof more than fifty offices located around major productioncentres and ports of shipment. In addition, organizationsmay be recognized as agencies for inspection and /or qualitycontrol. Recently, the government has exempted agricultureand food products, fruit products and fish and fisheryproducts from compulsory pre-shipment inspections,provided that the exporter has a firm letter from theoverseas buyer stating that the overseas buyer does notrequire pre-shipment inspection from official Indianinspection agencies.

Pollution Control

No Objection Certificate from Pollution Control Board is amust.

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Voluntary StandardsThere are two organizations that deal with voluntary

standardization and certification systems in the food sector.The Bureau of Indian Standards looks after standardizationof processed foods and standardization of raw agriculturalproduce is under the purview of the Directorate of Marketingand Inspection.

Bureau of Indian Standards (BIS)

The activities of BIS are two fold, the formulation of Indianstandards in the processed foods sector and theimplementation of standards through promotion and throughvoluntary and third party certification systems. BIS has onrecord, standards for most of processed foods. In general,these standards cover raw materials permitted and theirquality parameters, hygienic conditions under whichproducts are manufactured and packaging and labellingrequirements. Manufacturers complying with standards laiddown by the BIS can obtain and "ISI" mark that can beexhibited on product packages. BIS has identified certainitems like food colours/additives, vanaspati, containers forpacking, milk powder and condensed milk, for compulsory
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Foreign Technicians can be freely hired.

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Import of Capital Goods

Import of capital goods is automatically allowed if it isfinanced through Foreign Equity. Alternatively, approval isneeded from the Secretariat of Industrial Approvals. Theapproval depends on the availability of Foreign ExchangeResources.

Import of Second Hand Capital Goods

Import of Second hand goods is allowed subject to thefollowing conditions:

Minimum Residual life of 5 yearsThe equipment should not be more than 7 years old.A certificate from the Chartered Engineers of thecountry of origin certifying the age and the Residuallife is to be produced.Import will be allowed only for actual users.

Dividend Balancing

Remittances of dividend should be covered by earningsfrom exports recorded in the years prior to the paymentof dividend or in the years of the payment of thedividend.
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