Pakistan Dairy Association is Dissatisfied With FY20-21 Budget

Pakistan Dairy Association (PDA) is unhappy with the budget 2020-2021 as no initiatives were taken to revive the dairy sector despite submitting three proposals to the government for its economic development and how the government can raise revenue in medium to long term.

The dairy sector has the potential to employ 60 million people. Currently, more than 10 million families are connected with milk processing companies. Altogether Pakistan produces 60 billion liters of milk per annum and has the potential to double the production through increasing milking yield per animal, said a released statement by PDA.

Chairman PDA and CEO, Dairyland Pvt Ltd said,

It is now high time for the government to take notice of the dairy sector and make the necessary decisions to support the dairy sector. If immediate and supportive actions are not taken by the government, we are afraid that industry will collapse leaving millions of families deprived of employment, and livelihood. Likewise if industry collapse, people will be deprived of safe milk resulting in stunting, wasting and underweight death toll.

Pakistan is the 5th largest producer of milk in the world. Dairy contributes 11% to the GDP of Pakistan, reads the statement.

In a conducive environment, this has the potential to become an economic powerhouse for the country. Almost 44% of children under the age of 5 years are stunted and almost 15% are facing malnutrition. This is a national concern and the government should support the dairy sector to produce quality and safe milk and make the milk available for every household of the country.

The dairy sector can play a vital role to revive the rural economy, by only 1% increase in the market share of processed milk can result in additional 2 billion liters of annual milk production and over Rs. 6 billion of tax revenue for the government, said by Senior vice chairman PDA and Managing Director, Friesland Campina.

Some facts and challenges of the dairy sector in Pakistan.

• The industry spent over Rs. 500 million in the rural farmer development program and capacity development.
• The industry supports farmers’ inefficient milk supply chain and educates them on how to increase the milking yield of their animals.
• Industry invests almost Rs. 1.5 billion to educate and create awareness about safe milk and change the negative perception of packaged milk.

PDA revealed some facts in the released statement, which are as follows:

• Only 5% of the total milk production in the country is processed.
• Raw & loose milk may be unsafe for human consumption, because there are no quality & regulatory measurements at the farm level, further we have a poor & inefficient supply chain of milk.
• Almost 95% of the milk consumed in Pakistan is unsafe, unregulated, and untaxed.
• The packaged industry is able to produce safe milk ensuring quality and nourishment. The industry also pays taxes and contributes to government revenues. All packaged milk is tested by the government laboratory periodically to ensure safe milk standards.
•  The packaged industry purchase almost Rs. 120 billion worth of milk annually from local farmers.

The challenges facing the industry are as follows:

• The dairy industry has been declining since the abolishment of zero-rating tax i.e. 2016. For the past two years, the industry is making losses. If this continues, processors will have no option but to close their doors for business.
• The gap between the price of loose milk and packaged milk has increased due to a lack of safe & quality milk available and poor supply chain.

The PDA has recommended the following solutions to the government:

•  The zero-rated sales tax regime is a win-win for the Government and dairy sector.
•  The sales and profitability of the industry will grow.
•  Create incentives for new foreign direct investments (FDI) for the modernization of the industry.
•  The government can earn up to Rs. 25 billion in overall revenue through sales tax and income tax.
• Minimum pasteurization law to be implemented in large cities like Karachi, Lahore, Faisalabad, Hyderabad, Multan, and Rawalpindi/Islamabad so that raw milk is not sold without any format of packaging.