BRDO: 88% of provisions of Law On Milk are defective and prevent market development

Round table on Milk Market Regulation

Development of the Ukrainian milk market is being held back by defective regulation, a round table organised by the Better Regulation Delivery Office (BRDO) has heard.

Ukraine ranks 9thin the world in terms of milk production, representing more than a third of gross livestock production. In 2017, the country produced 10.3 million tons of milk, 2.5 times less than production volumes in France (24.6 million tons) and 3 times less than in Germany (32 million tons). Today, the capacity of the market for raw milk, which comes to Ukrainian processing enterprises, is 26 billion hryvnias.

At the same time, the number of dairy cattle in Ukraine has decreased by 17% in the last 5 years, and the milk market loses up to 2-3% of production annually. 73% of the total production is from privately owned farms and only 27% are agricultural enterprises. However, the dairy industry has significant potential for development and productivity growth.

The Ukrainian government, business and public representatives discussed ways of solving market problems during a round table on ‘Milk Market Regulation’ in Kyiv on September 25. The event was organized by the BRDO Office with the support of EU4Business FORBIZ project, as part of the Public Dialogue #PRODialogue.

“Changes in the milk market are really needed, so we initiated the development of the Draft Order, which should improve the quality of milk. We are interested in quality products; the demand for them is growing, so we provide state support to those farms that are ready for high standards of work and cooperation,” the Deputy Minister of Agricultural Policy and Food Olena Kovaleva said, when opening the event.

BRDO experts have conducted a systematic analysis of the regulatory framework and found out that 16 of 57 regulatory acts in the milk production market are irrelevant and 5 regulatory acts are illegal. Most of the 17 regulatory instruments have high corruption risks due to undefined and non-transparent procedures.

'Grey areas'

“The Law On Milk and Dairy Products contains a lot of contradictions, and 88% of its provisions are defective, and this creates additional barriers for the market and business development. In this way, we have a huge grey area, complicated rules for identifying animals, and problems with milk quality and safety. The procedures should be simple and clear,” said the Agriculture Sector Head at BRDO Andriy Zablotskyi.

So, for example, the main instrument on the market, which is a cattle certificate introduced to identify animals as well as register and control milk production, currently contains no clear conditions to calculate the cost of services and no clear implementation procedure while not being a fully valid document confirming the ownership of animals.

The Head of the State Food Safety and Consumer Protection Service Volodymyr Lapa agrees that this instrument is inadequate, “The procedure is overloaded, and this is one of the reasons for the existing grey market. We are currently working to improve the animal identification system to make it simple and operating in an electronic format.”

Other instruments aimed at ensuring the traceability of milk production also do not work. Moreover, there is no legal mechanism to regulate ‘producer – intermediary – processor’ relations. As a result, 57% of milk production from privately owned farms is beyond the state control of safety and quality of products.