More incentives for dairy sector
The dairy sector t has the potential to contribute around USD 4-6 billion annually to Pakistan’s economy, given favourable conditions and incentives that encourage investment.
Chairman, Pakistan Dairy Association (PDA), Anjum M.Saleem has said that Pakistan is the world’s third largest milk producing country, with an annual output of approximately 37 billion liters. According to the Economic Survey of Pakistan 2012-13, the contribution of the dairy sector to our national GDP is 11.7 per cent. The dairy sector also provides employment to millions and livestock is raised by more than 8.5 million small and landless farmers in rural areas, most of which is also used as a dairy source.
He said that the demand and supply gap is a massive challenge facing the dairy sector which calls for long-term strategies and small-scale programmes to achieve long lasting success. Less than 5 per cent of the milk produced in the country is processed and reaches consumers through formal markets. The remaining is ‘loose’ with no quality checks, pricing, branding or identity.
He said that organised dairy industry in Pakistan is fully cognizant of the challenges it faces in terms of helping farmers adopt better farm practices to increase milk production and improve quality. For instance, Pakistan Dairy Association’s member industries conduct training programmes and help farmers increase yield per animal, taking care of their animals, focusing on their hygiene and adopting modern farming practices.
The majority of dairy farmers are small-scale cattle breeders. It is essential that they know the modern methods and techniques by which they can increase their animals’ yield. To train these farmers, leading industry players have established centers that train around 5,000 small dairy farmers annually.
Anjum M. Saleem, on the question whether Pakistan’s large milk sector offers enough potential for foreign investors, he said the potential is enormous because of the huge vacuum that exists. We remain a country with one of the highest farm-gate prices. This is because there are no subsidies available to the farmer when it comes to buying or selling of animals, raising them or feeding them. Also, the informal sector is literally calling out foreign investors as it lacks proper cold storage and conservation mechanisms. People looking to invest will do so but only if they see good returns and for that, the government needs to adopt a businessfriendly approach.
The chairman PDA said Pakistan could learn a lot from other milk producing countries to increase its milk yield. An encouraging sign is that Pakistani authorities are taking note of the successes which Turkey has enjoyed in the last 10 years. They are looking to emulate this in Pakistan. In Turkey, the th government t provided id d necessary support and assistance to the dairy sector in the form of subsidies and also an enabling taxation regime which covered such sub-sectors as: breeding, feeding, quality testing, processing and others. As a result, packaged milk consumption increased from 30% in 2002 to 70% in 2012. In addition, the competitiveness of the sector improved greatly as did the country’s health figures.
Another model for our dairy industry could be India where the growth of the dairy sector during the last three decades has been impressive because the government introduced policies for a suitable environment for milk production. “We can also learn valuable lessons from Iran and China who have increased their milk production by adopting modern dairy farming techniques, importing productive animals and making the supply-chain mechanism efficient,” he said.
Apart from zero-rating and subsidies, the government could support the processed milk sector by continuing the current policy that enables dairy industry to claim input costs. This will give the investors’ confidence because they will see that the government has a consistent policy. In addition, it could also regulate the informal dairy sector that hardly pays any taxes but sells milk at a slightly lower price than packaged milk. At present, loose milk is available at around Rs80-90/kg in some areas of the country while the price of packaged milk is Rs95-100/litre. The government ought to expand the tax net to cover the unprocessed dairy industry (more than 90%) which is untaxed.