Nestle sees positive growth in dairy sector; govt support sought

Syed Yawar Ali, Chairman Nestlé Pakistan Limited talked about the untapped potential in the dairy sector in an interview.

Q: How do you see the country’s dairy sector?

A: In the past 10 years, Pakistan’s dairy sector has seen positive growth and development. As part of what has been dubbed the ‘white revolution’, numerous steps have been taken to bolster the domestic dairy industry, including improving research facilities, training and capacity building of farmers and training veterinarians.

Pakistan is currently the 3rd largest producer of milk in the world. There are around 10 million farming families, producing an estimated 40 million litres of milk annually, and contributing a share of 11.30 percent of the GDP, more than any major crop. 

Investment in the sector has also continued at a breakneck pace, with several new players entering the market in the past few years. 

While Pakistan is still a net importer for dairy products, fortunately the sector has the potential to reverse this situation in our favour. With the right policies and support of the government, the country can become a global player in the dairy sector.

Q: Do you think that a withdrawal of zero rating on dairy products could affect the growth?

A: The government has imposed 10 percent sales tax on various segments of the dairy industry in the last year’s federal budget. As a direct consequence of this step, the price of these items rose by several rupees. Completely removing the zero-rating will have definite further negative ramifications for the sector, as the price of packaged milk is likely to increase by about a further 6-8 rupees driving consumers away from packaged milk and towards unprocessed, loose milk. Consequently, as demand for packaged milk falls, related industries for breeding, feeding, and milking equipment will also suffer, as the demand for their products will fall substantially. This in turn is likely to dampen enthusiasm for investment in the sector, which will inevitably lead to a further slowdown and eventual stagnation, thereby impacting the livelihoods of over 600,000 farmers, from which the industry sources milk.

Q: What the government can do to promote processed dairy products?

A: There is much that the government can do, starting from awareness-building campaigns around the importance of milk as a key source of nutrients – Pakistan has one of the highest malnutrition rates in the world – to providing subsidised milk to schools for children’s consumption, to actually providing concrete support to the sector in the form of subsidies (as in the case of many other agri-related sectors). There is also a need to educate consumers on the importance of treated, safe milk (whether pasteurised or UHT). 

Q: Is there any export opportunity?

A: The potential for export is huge. As I mentioned in my very first response, we’re the 3rd largest producer of milk in the world. Yet, there is a long way to go before Pakistani dairy producers can think of exporting; however, the challenges are far from insurmountable. Of course, in order to achieve this, government support is essential. The dairy sector needs a complete revamp, relaxed tax policies, the introduction of laws for pasteurisation and processing to ensure quality of milk is maintained. Private sector players should share their expertise with government in developing the dairy sector to achieve the maximum potential; steps could be undertaken to create training programs for dairy farmers and tax incentives for investors bringing capital to the dairy sector.

Despite the many challenges it faces, Pakistan’s dairy sector has the potential to grow further. With the right direction and support from the government, we could not only become a strong support for our troubled economy, but also a major stakeholder in the global dairy industry.