Paris-based Danone seems intent on buying a majority stake in a new milk-processing project, but there could be some roadblocks. The Keventer Group is keen on inducting a foreign partner in the project to gain access to foreign countries, mainly the European markets, but Kolkata (West Begal, India)-based Keventer is clear that the foreign company can only be an equal partner and does not want to cede majority stake.

The equity structure of the new project, which aims to become the country’s largest milk processing unit, envisages the Rajasthan government holding 11%. Keventer will hold 44.5% and wants Danone to hold a similar stake.

In the past year, average milk product prices have shot up by around 50% across markets. Also, milk products consumption in markets like the Middle East, Southeast Asian countries and China have picked up substantially and is growing. at over 35% per year. Government surpluses are no longer available in dairy-producing countries such as the United States, the largest exporter of milk powder, and the EU, the largest exporter of cheese.

Industry experts say India is probably the only major milk producer with a minimal share in international milk trade. With 81 million tonnes of production, Indian export of skimmed milk powder and butter has not exceeded a few hundred tonnes.

Danone, which reported over  €14 billion sales in 2007, is the largest producer of fresh dairy products in the world. However, with Danone unwilling to budge, Keventer has begun discussions with other European dairy players.