Milk Vita project axed after 6 years and spending Tk80cr

Six years and Tk80 crore into a Tk387 crore project aimed at expanding the business and profitability of Milk Vita, Local Government, Rural Development, and Cooperatives Minister Md Tazul Islam ordered its scrapping due to concerns about its viability.

Milk Vita – a milk and dairy products company owned by the Bangladesh Milk Producers Cooperative Union Limited – undertook the project to set up a dairy factory, ensuring the development of livestock breeds and the multi-purpose use of milk in Faridpur and adjacent areas.

During a views-exchange meeting organised by the dairy firm at Tejgaon yesterday, Milk Vita Chairman Sheikh Nadir Hossain Lipu, who has been serving as the company's chairman since 2015, told the minister that when this project was undertaken, its feasibility study was not done.

"Now it appears that if the project is implemented and the factory is set up, there will be a massive crisis of its raw materials. Again, if raw materials are brought from other regions to make dairy products, there is not enough market to sell them in this region. Eventually, the factory would be left unused," he added.

In response, Minister Tazul said, "If the situation is like this, take measures to stop the project. Discuss with the Planning Commission if there is an opportunity to shift this factory to another area; it should also be considered."

The Milk Vita authorities are also worried about the viability of its two other projects. The total cost of these three projects is Tk540 crore. Now the Milk Vita authorities feel that they will not be able to generate any revenue from any of the projects.

When Tazul asked about the projects, Lipu said, "These projects were also taken without any study due to the pressure from officials and superiors."

According to Milk Vita sources, Tk78.79 crore has been spent on several activities related to loan distribution at the farmer level for buying cows, the purchase of vehicles under the project, and land acquisition.

Beginning in 2018, the project deadline was extended by three years until June 2025. It aimed at setting up a milk processing and dairy products manufacturing plant, land acquisition, the construction of officers and staff quarters, the setting up of milk cooling centres and mini dairy plants, and the construction of a UHT milk plant. At the same time, the cost of the project was increased once for the purpose of setting up an ice cream factory in 2022.

Milk Vita has two other development projects underway. One of them is establishing a milk factory in Patia, Chattogram to increase milk production. The project, which has been running since 2017, was estimated to cost Tk47.94 crore. The implementation progress of the project is 98%, and it is supposed to go into production in a couple of months.

But the Milk Vita chairman now says, "Where milk is priced at Tk50 in the northern region, it has to be bought at over Tk100 in Chattogram. It will not be possible to make a profit by buying raw materials at such a high price. Because of this, this factory will not be of any use to Milk Vita."

He thinks about shifting the machinery to another factory.

The chairman is also worried about the powdered milk factory in Baghabari, Sirajganj, built at a cost of Tk105 crore. Due to the high cost of production, the authorities are also worried about making a profit from here. That is why he wants the duty on imported powdered milk to be increased.

Then the minister directed the officials so that the actual picture of each factory and each project was investigated separately and presented to the ministry.

How profitable Milk Vita turns into a loss-making company

According to its financial statement, Milk Vita incurred losses for the first time in a decade in the fiscal 2022-23, with the loss reaching Tk4.36 crore. Its earnings stood at Tk349 crore.

However, when the minister asked if the company was profitable, all officials responded positively.

Milk Vita has five factories across the country, and two of them have been closed for a long time. The expenses of the closed factories are being met from the income of the running ones. Despite the constant increase in expenses, its income is gradually decreasing, and it is turning into a loss-making company.

It was also planned to leave the closed factories to the private sector to make them profitable. But no company finally agreed to invest here.

Milk Vita sources say the sales of its dairy products have increased, but processed milk sales have decreased. Five years ago, it used to sell 1.70-1.80 lakh litres of liquid milk per day, whereas now it has come down to 70,000-80,000 litres. In the fiscal 2014-15, Milk Vita collected 6.76 crore litres of milk, compared to just 3.78 crore litres in 2022-23.

The company sells products, including milk, cakes, pastries, full cream milk powder, sandesh, ice cream, rasgolla, sweets, yogurt, buttermilk, chocolate milk. Liquid milk accounts for 54% of the total products sold.

The main reason for this is that the company does not have an expert marketing team, according to Milk Vita officials. And eventually, Milk Vita will not be able to survive in the market, even with the advantage of quality products and a strong brand image.

Despite trying to leave marketing to the private sector by advertising three times, it was not successful.

The minister instructed officials to quickly form a committee to study the issues and evaluate the factories on an urgent basis. He also suggested hiring a consultant, if necessary.

Stakeholders say the company is gradually moving away from its plan to develop the dairy industry to ensure a fair price for the milk produced by the farmers and to supply safe and healthy milk to the consumer class. When nationwide demand increases, the capacity of the company gradually decreases.