Pakistan’s economic potential is hidden in agriculture and its value addition. Within it, the dairy sector has significant potential in value addition. The processed milk share in Pakistan is around 5 percent versus over 85 percent in Turkey, Indonesia and Thailand. It is 20 percent in India. The transition from loose milk to processed milk does not only have health benefits, but it has broader economic implication in terms of job creation, fetching FDI, tax collection, and creating potential exporting surplus to name a few.
All what is required from government is to facilitate corporate operating in the sector to grow via right fiscal policies and apt regulatory framework. The health benefits are on the top. Since 95 percent of the milk market is unregulated, consumers are exposed to adulterated milk with no check on Aflatoxins levels, chemical adulteration or broader level solid and fats standards. There are no quality standards for loose milk, so the only way to control the adulteration and other issues is by having minimum standards.
Countries have done that through minimum pasteurization law - the case in hand is Turkey. That can be done in big urban centers and eventually be expanded to small cities and rural segment. But that alone cannot work without having business friendly regulatory and taxation environment. There are multiple food regulatory regimes operating in Pakistan which are at times competing which other, rather than complementing. There is a need to have one national standard to be executed by provincial bodies.
Living in this environment was already challenging for the private formal sector operating in dairy segment; recently, the government ended the zero rating on the processed milk industry which has reversed the direction of processed diary industry growth trajectory.
A few companies have been reducing the footprint in the rural segment as in days of rising cost amid declining revenues; the inclusive approach is being hurt. The bigger loss is to the small farmer as the poor chap is losing guaranteed buyer. The government needs to introspect and should not let the short term revenues dictate long term economic and health benefit through enhancing processed milk industry.
The industry is proposing zero rating to be reinstated and withheld refunds released. This will incentivize the industry to engage with small and medium size farmers to come in the dairy value chain. The farmer will be educated to improve health and breed of animals to enhance yield. Having milk without adulteration along with economic opportunities will go a long way in resolving malnutrition and stunting problems.
On economic side, this will help reduce powdered milk imports and can eventually create surplus. Not to mention, there is a huge potential to attract FDI. If this government is all for developing agri value addition linkages, that requires level playing field for formal segment.
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