As demand overtakes supply, a big milk fat problem

The challenge isn't one of milk availability per se. Milk production at an aggregate level has been growing annually by about 3 per cent over the past decade, according to the US Department of Agriculture. But more and more of that is coming from cows than buffaloes.

Policymakers can take credit for making India the world’s top milk producer. But they also need to address its big fat problem.

3 min readNov 11, 2026 06:05 AM IST First published on: Nov 11, 2026 at 06:05 AM IST

Milk is naturally prone to adulteration; milk fat even more so. The unscrupulous players who add water to milk would probably not forgo the opportunity to lace desi ghee with palm and other vegetable oils or other animal fats such as tallow and lard. The crackdowns by the Food Safety and Standards Authority of India and other regulators, especially post the Tirupati laddu scandal in September 2024, have considerably undermined the operations of such suppliers. In the process, these have also increased the demand for genuine ghee, khoya, paneer and other high-fat dairy ingredients. That has received a further fillip with the September 2025 cut in GST rates on ghee, butter and cheese from 12 to 5 per cent, on ice-cream from 18 to 5 per cent, and on paneer from 5 to zero per cent.

The flip side is that supply isn’t keeping pace with demand on the back of rising incomes and consumer awareness about what constitutes “real” milk fat versus vegetable oil-based frozen dessert or analogue paneer. India, today, faces a problem of milk fat shortage. The challenge isn’t one of milk availability. Milk production at an aggregate level has been growing annually by about 3 per cent over the past decade. But that is coming increasingly from cows rather than buffaloes. Standard cow milk has 3.5 per cent fat and 8.5 per cent solids-not-fat (SNF). For buffalo milk, these are taken at 6.5 per cent and 9 per cent. If buffaloes are contributing hardly 45 per cent to the national milk output now, as against 60 per cent three decades ago, it translates into that much less of total solids — specifically fat — being produced.

Over time, this is causing a fundamental imbalance. As fat demand continues to go up, meeting it more through cow milk would also result in greater production of SNF, that is, skimmed milk powder (SMP), for which the domestic market isn’t expanding at the same rate. One could well have a situation where India is surplus in SMP and not so in fat. That the country is already deficit in milk fat is evident in average ex-dairy prices of butter soaring by over 54 per cent between October 2023 and October 2026, compared to just 18 per cent for SMP. Policymakers can take credit for making India the world’s top milk producer. But they also need to address its big fat problem.