Growth Outlook of Dairy Industry
Pakistan is one of the top three milk producing countries in the world. This makes the dairy industry a significant contributor to the national GDP – about 11.7 per cent. If constant efforts are made to improve the sector, it will add an estimated $4 to $6 billion annually to Pakistan’s economy.
The dairy industry certainly has a great potential for growth. All it needs is incentives and supervision from the government both at the federal and provincial level. This would play a vital role in ensuring a means of constant livelihood for the small farmer. There is also a bright possibility of lucrative local and foreign investment in the sector through corporate farming, investments by foreign dairy companies and collaboration with international donors.
The local dairy farmers are either not aware of improved inputs for increasing their productivity or cannot afford to acquire such inputs. They should be provided cheaper and cost-effective medicines, feeds and feed ingredients, fodder seeds, equipment, etc. to increase productivity and decrease per unit production cost. Dairy farmers need improved farm equipment so that they can get rid of their old and traditional methods and adopt some kind of mechanization. The government can establish utility stores for this purpose where the required items can be provided at subsidized rates. Such utility stores can be set up in the major dairy farming areas for the convenience of small farmers.
Non-scientific dairy farming practices have been followed in the sub-continent since time immemorial and these need to change if the dairy sector must progress on modern lines. Apart from consulting the local quake or following home-grown remedies, there is no tradition of consulting experts in animal health, reproduction or nutrition and addressing the relevant problems accordingly. The government can play an integral role in this by further expanding its veterinary network.
There has never been a census of milking animals in the country and farmers have no idea as to which of their cows and buffalos have high milk yield or none at all. No attention seems to have been paid to the training of farmers as well. It is only fair for the growth of any industry that the relevant elements in the value chain are properly organized. Development of modern dairy practices involves scientific systems that must be introduced at the very basic level and this can only be done if the corporate sector is involved. This can be financed through local and foreign investment and cooperation can also be sought from international donor agencies.
In this scenario, when the country’s dairy sector is poised to take a major leap forward, given the requisite encouragement and incentives, there is also talk of sales tax being imposed on the processed milk industry in the forthcoming budget. Reports indicate that the government is considering this as a significant revenue generating measure though it is not realized that progress in the sector would be reversed by such a tax and the effects would be felt all around.
Malnourishment is a huge issue in the lower socio-economic bracket and milk is perhaps one of the few nutritious food items that the poor can afford. That is why 80 per cent of processed milk is sold in quarter liter packs to make it affordable for this segment. In such a scenario, the intention on part of the government to levy a sales tax on processed milk is worrying. Sales tax would lead to price increase of packaged milk and would also increase cost of loose milk. This would mean that the lower income groups would no longer be able to afford milk on a daily basis. Experts predict that because of this trickle-down effect, the overall sales volume of the dairy industry will decrease by 20 per cent which means government revenue will decrease instead of increasing.
The Pakistani dairy industry still has a long way to go. Despite all their problems, the small dairy farmers have now found a stable source of livelihood as their produce is purchased by the milk processing companies. It is because of the local and foreign investment made in this sector that the potential has also become visible for exporting dairy products to countries such as Malaysia, China, Indonesia, Bangladesh and Iran. In the past, the favorable policies of the government helped the dairy and livestock industry to exploit its potential because of which revenues started coming from the industry. Thanks to corporate support, the quality of milk has also improved significantly and the demand-supply gap has reduced. Availability of better quality milk has also contributed to the overall nutrition of the impoverished class living in rural areas.
What the dairy sector needs is an integrated development plan such as India’s National Dairy Plan which aims to increase their milk production to 180 million tonnes by 2020. The plan will enhance share of the documented dairy sector from the current 30% to 65%. Pakistan’s dairy industry has a long road ahead and the proposed sales tax could discourage investors from coming into the field. This, in turn, will affect small-scale dairy farmers, reduce milk consumption, fuel inflation through increase in prices of loose and packaged milk and damage industry growth.