The delegation of Pakistan Dairy Association that called on Prime Minister Shahid Khaqan Abbasi at Prime Minister’s Office Islamabad on December 5, 2017 were grateful to the prime minister for awarding them and audience and listening to their challenges. They urged the prime minister to bring about key changes to ensure the industry thrives and provides much needed nutrition to the citizens of the country. Mr. Sikandar Hayat Bosan, Minister for National Food Security was also present during the meeting.
The delegation comprised on Syed Yawar Ali, Chairman PDA and Nestle Pakistan Ltd, Mr. Ali Ahmed Khan, CEO Engro Foods Ltd, Mr. Aamir Khawas, Chief Operating Officer Fauji Foods, Mr. Sulaiman Sadiq Monoo, CEO Dairy Land Pvt. Ltd., Mr. Anjum Muhammad Saleem, CEO Shakarganj Food Products Pvt. Ltd., Mr. Jorge Montero, MD Tetra Pak Pakistan Ltd., Mr. Muhammad Memosh Khawja, CEO Haleeb Foods Ltd., and others.
The delegation highlighted the following issues and recommendations for growth and capitalization of the potential of the sector:
Harmonization of Food Standards
After the passage of the 18th Constitutional amendment giving Provincial autonomy to the Provinces, various subjects including education, environment, health and foods standards became prerogatives of the provinces.
Provincial Food authorities were created and they have started making independent food standards which not only vary from Federal standards making body i.e. Pakistan Standards Quality Control Authority but also vary from international standards, creating serious problems related to trans provincial trade, dairy exports and complex compliance and multiple regulatory regimes, which are discouraging growth and investments in the sector
Recommendation: Harmonization of food standards at national level / Federal Level. Monitoring and implementation to be done by Provincial bodies as globally practiced.
Taxation regime: Pakistan is the 3rd largest milk producing nation globally. However, only 5% of it is processed and packed while the remainder 95% is unprocessed, unregulated and untaxed.
The zero tax rating regime was revoked in 2016 with an exemption regime coming into effect. This resultant increase in costs has widened the price gap between processed milk prices and loose milk prices has widened. This has resulted in a sharp decline of the industry as well as reversing the conversion of unprocessed milk into documented formal sector processed milk. Lower profitability and decline in volumes has severely impacted the investments in the sector and has marked the initiatives aimed in development of milk farming communities and cool chain infrastructure
Recommendation: Reinstate the zero rating regime by re-transposing milk and milk related products in the Fifth Schedule of the Sales Tax Act, 1990.
Regulatory Duty (RD) on Skimmed Milk Powder: The processed industry accounts for about 30% of powder imports, primary to manage the seasonality of milk supply as during summer milk production drops by 60-70% at farm level on account of poor fodder availability and lactating cycle. Second reason of imports of skimmed milk powder is unavailability of quality of milk powder required for specialized categories like infant milk etc.
Presently RD is 25% and in addition to this Customs Excise duty is 22% it has hugely impacted the profitability as passing on the price increase will mean even bigger price differential with loose milk and further decline in the volumes
Recommendation: Removal of RD and Excise for dairy processors
Minimum Pasteurization Law: Across the world and in developing countries milk is recognized as key source of nutrition and Governments are increasing regulation to safe guard consumer’s interest by introducing Minimum Pasteurization Law to ensure base line milk quality. Quality milk availability to the citizens of the country will mark and eventually reduce stunting and malnutrition rates amongst children. Minimum Pasteurization law will help the dairy industry to become compliant in exporting dairy products and hence boost exports.
Recommendation: Introduction of the Minimum Pasteurization Law under Federal Jurisdiction, adopted and implemented by Provinces. Business models of Turkey, Egypt, Indonesia and Vietnam are guiding models for us. The delegation was thankful to the prime minister for awarding them an audience and listening to their issues and assured them that as law abiding members of the industry, they would abide by all federal laws. The Prime Minister promised to take action to protect and promote the industry.