The dairy industry will have no choice but to pass on the price increase to consumers if new taxation measures are imposed – as various news reports suggest – said Babur Sultan, Pakistan Dairy Association (PDA) Chairman, after an emergency meeting convened by the PDA on Thursday.
The session had been called to discuss the impact of proposal under consideration by the government that zero-rating be withdrawn on dairy products in the 2016-2017 budget.
The members concluded that there will be wide-ranging negative impacts on the dairy sector as well as the lives and health of millions of Pakistanis. The members said that they could not afford to absorb the increase in costs, and would have to increase the price of milk by Rs 7 to Rs 8 per litre.
Packaged milk is only 6% of the total milk consumed in Pakistan while milk and dairy products account for 22% of kitchen expenditure, which is more than wheat (12%).
PDA Chairman Babur Sultan said: “We fear that if the zero-rating regime is withdrawn, it will result in a decline of over 20% in the sale of packaged milk. Consumers will, therefore, be pushed to consume unhygienic and unprocessed loose milk.”He said that the government needed to continue the zero-rating taxation regime, re-transpose dairy products from 8th to 5th schedule of the Sales Tax Act 1990 and refund the full amount of outstanding sales tax refunds pending for the last many years in order to boost investor confidence.
PDA Vice Chairman Ikram-ul-Haq added that it would be a lose-lose situation for the government. “The revenues that the government receives from the processed dairy industry will fall substantially. But that’s nothing compared to the adverse impact on the livelihoods of 6,00,000 farmers associated with dairy.” He said the PDA had already presented its case to Finance Committee of National Assembly, Federal Bureau of Revenue Chairman, and Special Assistant to Prime Minister on Revenue Haroon Akhtar. “We urge the government to rethink this proposal. This will only lead to an increase in rural poverty and a decrease in GDP,” he said.
Syed Yawar Ali, ex-chairman and director of PDA said, “The new taxation measures will be another blow to farmers who are already under pressure due to a poorly performing agriculture sector. It is the sale of milk that sustains them. Additional tax on milk will lead to lower demand and thus make it harder for dairy farmers to make ends meet.”
