Why taxing milk is an anti-people measure
Milk is one of the most important food items in Pakistan. Its presence is felt in all meals, at all times of the day. We drink it fresh, mix it in tea, boil it, use it to make yoghurt, lassi, butter, cheese, ice cream, and various other confectionaries. In point of fact, despite being the third largest producer of milk globally – at 46 million tons annually – Pakistan is still a net importer of milk.
Even so, there is huge potential for Pakistan’s milk production to grow to a point where it not only meets domestic demand, but allows for us to become net exporters. Indeed, the potential for Pakistan to become a major player in the global dairy industry is something that has been recognised by the government and legislators. Over the past decade, various concrete steps have been taken to help bolster Pakistan’s dairy sector. This ‘White Revolution’ has aimed at improving research facilities, training and capacity building of farmers, training veterinarians, improving the cold chain through milk chillers, promoting healthy pasteurised milk, developing model commercial dairy farms, focusing on breed improvement, facilitation of credit financing to dairy farmers, and linking rural based farmers to market mechanisms.
All these measures are expected to vastly improve Pakistan’s dairy sector. In fact, according to most estimates, the White Revolution is expected to target an annual production of 40 billion litres by the year 2015. As direct consequence of these efforts, and a positive business environment conducive to growth, existing milk producers have been encouraged to increase their production capacity, while several new brands – including some international players – have either entered the Pakistani dairy sector or have expressed their interest in doing so.
Having said so, the Pakistani dairy industry still has a long way to go before the country can see itself becoming a leading exporter of milk. In addition to continued support from the government and an atmosphere conducive to business and investment, Pakistan’s dairy sector requires a formal integrated roadmap to achieve the ambitious expectations of the White Revolution. Within the existing framework, many local dairy farmers remain unaware of how they can increase productivity – or in other cases are unable to implement the necessary methodologies. This is why on-the-ground training and workshops are essential. For centuries, our local farmers have used non-scientific methods to produce milk. For Pakistan to become competitive on a global scale, it is imperative that the dairy sector evolves along modern lines.
The continued development of Pakistan’s dairy sector can only take place, however, if the business environment remains one that encourages further investment and works towards incubating existing progress. Given the existing challenges – not to mention constant and increasing competition from international players – the imposition of sales tax on milk would discount the years of progress made by Pakistan’s dairy sector, eliminating much of the development made by the White Revolution. Another important factor to note is the effect of such taxation upon the affordability of milk by Pakistan’s lower income populations. Pakistan currently possesses one of the highest malnutrition rates in the world – and milk has traditionally been one of the few nutritious food items that the poor can buy.
Milk contains key minerals such as calcium, vitamins and iron, and is a source of various essential vitamins. In fact, in most developed countries, milk is zero-rated for tax as it is considered an essential food item for the family, especially children. In the average Pakistani household, milk is given even more importance than flour. The nutritional value of milk, combined with the need to make it affordable for the masses, is in fact one major reason why almost 80 per cent of packaged milk in Pakistan is sold in smaller packs, making it easier to purchase. Imposition of sales tax on milk would lead not only lead to an increase in the price of packaged milk, it would have a trickle-down effect on the cost of unprocessed milk. According to most experts, this will not only make milk less affordable for the vast majority of Pakistanis, it will also lead to an overall loss in revenue for the national exchequer due to a considerable decrease in sales volume for the dairy industry.
With all the progress that has been made over the decade, it is incumbent upon the new government to continue to encourage the growth and development of Pakistan’s dairy sector. Pakistan has always been a predominantly agrarian economy and the dairy sector is one area where we possess the potential to become global players to contend with. Given the domestic demand for milk – for both cultural and nutritional reasons – and the potential to become a major global player, it is therefore only logical that the government do all it can to continue to support the dairy sector and not take any myopic measures that may end up doing more harm than good.
The writer is director of the Pakistan Dairy Association, and an expert commentator on the dairy and FMCG industries with over 20 years of multinational experience
