Keep­ing milk af­ford­able

Enterprise - - CONTENTS - By Sam­ina Wahid

The aver­age Pak­istani finds him­self fight­ing a bat­tle of sorts on all fronts. Ev­ery day, he strug­gles to cope with the power and gas out­ages, crum­bling in­fra­struc­ture, health risks and grow­ing ter­ror­ism. Add to that the ev­er­in­creas­ing cost of liv­ing and you’re likely to push him over the edge.

Of course, it doesn’t help that the au­thor­i­ties make liv­ing in Pak­istan all the more chal­leng­ing. Con­sider, for ex­am­ple, the 2013-2014 bud­get in which a 17 per cent (from 16 per cent) gen­eral sales tax has been im­posed on most con­sumer goods. This also meant that pre­vi­ously tax-ex­empted, zero-rated items such as milk would also be taxed. This was an alarm­ing sit­u­a­tion be­cause Pak­istan is a na­tion of milk drinkers. An an­nual pro­duc­tion of 46,000 bil­lion liters puts the coun­try in the top three milk-pro­duc­ing coun­tries of the world. It is clear that the con­sump­tion is sub­stan­tial. Ac­cord­ing to a Gallup poll con­ducted in 2011, 39 per cent of the Pak­istani pop­u­la­tion con­sumes any­where be­tween one to two liters of milk on a daily ba­sis.

It must be men­tioned here that a ma­jor por­tion of the con­sumed milk in Pak­istan is used for hot bev­er­ages, pri­mar­ily tea. A large num­ber of peo­ple drink tea three times a day, if not more, for which milk is used as a dairy creamer/whitener. In fact, fig­ures sug­gest that Pak­istan’s con­sump­tion of milk re­lated to tea is far more than its use for other pur­poses. It is for this rea­son that the im­po­si­tion of the said tax would lead to dire con­se­quences. For starters, pro­cessed milk prices were ex­pected to go up by Rs 5 per liter, a sig­nif­i­cant in­crease for a fam­ily that con­sumes a liter of milk ev­ery day. The price per liter of fresh milk was also ex­pected to go up by the same mar­gin. Since the monthly house­hold ex­pen­di­ture on milk is far more than on wheat flour – 22 per cent and 12 per cent, re­spec­tively – the ef­fect of this price hike was likely to be felt by the con­sumer. Fur­ther­more, the in­fla­tion and as­so­ci­ated mul­ti­plier ef­fect would have ad­versely im­pacted the en­tire value chain. Some 600,000 dairy farm­ers, mostly lo­cated in Pun­jab and Sindh, would have suf­fered as there would have been a de­crease in the de­mand for milk as a re­sult of the price rise.

The Pak­istan Dairy As­so­ci­a­tion (PDA) feared that for­eign and lo­cal in­vest­ment in the dairy sec­tor would have been dis­cour­aged if tax were im­posed on the dairy sec­tor and the ben­e­fits of the “white rev­o­lu­tion” would not have ben­e­fited farm­ers, with the re­sult that con­sumers would have been de­prived of af­ford­able and qual­ity milk.

Thus, soon af­ter the an­nounce­ment, PDA pressed on the con­cerned au­thor­i­ties to re­con­sider its de­ci­sion to im­pose taxes on milk. Rep­re­sen­ta­tives of PDA gave ex­am­ples of sev­eral coun­tries such as In­dia, USA, UK and Canada where milk re­mains a sub­si­dized item be­cause it is an im­por­tant source of nu­tri­tion for both chil­dren as well as adults. All over the world, the price of es­sen­tial food items – milk be­ing one of them – is more or less kept af­ford­able whereas, in Pak­istan, the trend seems to be the op­po­site. Prices of es­sen­tial food items, such as flour, sugar and rice, are con­stantly on the rise, thus mak­ing it im­pos­si­ble for the com­mon man to pur­chase any of them. Thus, levy­ing a sales tax on milk would have made it un­af­ford­able.

It was in light of th­ese facts that the govern­ment de­cided to re­verse its de­ci­sion to im­pose sales tax on milk. Ac­cord­ing to a state­ment is­sued by the Pak­istan Dairy As­so­ci­a­tion, the govern­ment re­in­stated pre­vi­ously ap­pli­ca­ble zero-rat­ing on milk to en­sure con­tin­u­ous, sus­tain­able growth of the dairy sec­tor and to keep it af­ford­able for the com­mon man. This move would keep the price of milk in check while en­sur­ing that sales con­tin­ued to grow. It’s not just the dairy sec­tor that stood to ben­e­fit from this de­ci­sion but also the govern­ment that would profit from in­creased rev­enues. In fact, for­eign in­vest­ment in the dairy sec­tor would in­crease thus ben­e­fit­ing all stake­hold­ers.

The re­in­state­ment of zero rat­ing would con­trib­ute to the liveli­hood of mil­lions of farm­ers and in­dus­tries re­lated to breed­ing, feed­ing and milk­ing equip­ment would also ex­pand. This would lead to an in­crease in di­rect in­vest­ment in the dairy sec­tor, thus im­prov­ing upon the qual­ity of milk as well as pro­duc­tion ca­pac­ity. It would help in elim­i­nat­ing ru­ral poverty, im­prov­ing the stan­dard of liv­ing and pos­i­tively con­tribut­ing to the coun­try’s econ­omy.

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