PDA opposes increase in import duty on milk

LAHORE: Dairy association has opposed an increase in import duty on powdered milk, which will cause a surge in its prices in the local market.
The government is planning to raise import duty on skimmed milk powder in the coming budget to lend a helping hand to the local dairy sector.
Pakistan Dairy Association (PDA), in a letter to the secretary to the Ministry of National Food Security and Research Seerat Asghar, opposed an increase in the import duty rate on powdered milk.
A local dairy farmer Nishat Dairies Ltd (NDL), however, favoured the rise in import duty, and proposed to increase it from 25 percent to 65 percent to bring it at par with India.
NDL, in its letter to the federal secretary, said excessive imports of skimmed milk powder and whey powder by the dairy processors in Pakistan drastically impacts the local dairy industry, as raw milk produced by local dairy farmers is substituted by the imported low quality dairy products.
The NDL, quoting the increase in the profits of two major dairy processers in Pakistan, alleges that they were enjoying huge profits at the expense of local farmers. The international price for skimmed milk powder (SMP) and whey powder (WP) is at its lowest, so the dairy processors are not paying the appropriate farm gate price to local farmers, hence inflicting huge losses on them, the NDL letter said.
The NDL also alleged that the imported milk powder was neither regulated nor checked for quality. This, it said results in the import of substandard, low cost powder products by milk processors to maximise their margins at the expense of consumers’ health.
The NDL also asked the government to control cross border smuggling of these products, or else the rise in duty will become redundant.
On the other hand, the PDA refuting the allegations on the whole industry, said that increase in import of milk powder did not have any negative impact on the domestic industry.
They justified the imports of powdered milk by saying that the local production was not sufficient to meet the demand of the dairy processing companies. This, they said is contrary to India, which is a net exporter of milk.
PDA in its letter stated that even when SMP was priced 17 percent higher than raw milk, $3,855 per metric ton and Rs56.5 per litre respectively, the processing companies were importing powdered milk. They termed the recent decline in worldwide SMP prices a temporary phenomenon and said the prices will be back to old levels in the coming months.
Citing India, PDA said that the neighbour produces surplus milk which is used to manufacture dairy products, which are then exported. Pakistan, on the contrary, has a shortage of milk and cannot suffice its own requirements.
Comparing the pricing in India and Pakistan, the PDA said that milk prices are 33 percent higher in Pakistan. The current price of milk in India is Indian rupee 30-31 per litre (39-40 last year) for buffalo and Indian rupee 18-19 per litre (26-27 last year) for cow. If converted to Pakistani rupee, buffalo milk will cost Rs48 per litre, whereas commercial farmers are charging above Rs65 per litre. Milk prices in India have declined sharply compared to last year, whereas, in Pakistan the prices increased.
The PDA stated that the SMP imported by the renowned dairy industries is of the best quality. Every shipment is accompanied with the Certificate of Analysis (COA), Material Specification Data Sheet (MSDS), Halal Certificates and other certificates awarding the powder to be fit for human consumption. Samples of the SMP shipments are audited by the Pakistan Standards and Quality Control Authority (PSQCA) department at the Karachi port.
Countering the NDL’s argument against two milk processing companies, the PDA said those companies import SMP through proper channels and their Goods Declaration’s against imports are filed with the FBR.
The PDA also blamed the substandard and adulterated local milk quality as the reason why processing companies imported milk powders. Specialised products like infant milk and milk for young children, needs to be of the highest quality, which the local supply lacks. The imported powders not only offer the highest quality but also have stable specifications.
Furthermore, some of the PDA members have reported issues in the milk supplied by renowned commercial farmers that had positive antibiotic level, high Aflatoxin levels, abnormal percentage and variations in fatty acid profile, etc.
Increasing the duties would not increase the milk yield in Pakistan and would rather inflate the cost of the input for dairy processing industries. To offset that increase, processing companies will be forced to either reduce the price of milk procurement, or increase the price of the final product. This would lead to food inflation that will go against the goals of the sitting government.