Milk tax disrupts supply chain, PDA warns

KARACHI: The Pakistan Dairy Association (PDA) has warned of severe disruptions across the country’s formal dairy sector following the imposition of an 18 per cent sales tax on packaged milk, urging the government to reverse the measure and support long-term policy reforms.

In a high-level meeting with Federal Minister for Planning, Development and Special Initiatives Ahsan Iqbal, a PDA delegation outlined the fallout from the unprecedented tax, which has rendered safe and nutritious packaged milk unaffordable for millions of households and triggered sharp declines in milk procurement from farmers.

The delegation included Managing Director of FrieslandCampina Engro Pakistan and Vice Chairman of the PDA Kashan Hasan; CEO of PDA Dr Shehzad Amin; Dr Muhammad Nasir from FCEPL; Aatekah Mir from Nestle Pakistan; and Noor Aftab from Tetra Pak.

According to the PDA, the new tax has led to a 20 per cent drop in milk procurement, the displacement of over 40,000 farmers, and the closure of more than 500 milk collection centres. The association argued that the tax is reversing progress toward formalisation, discouraging investment in food safety and quality, and eroding public trust in the sector.

Minister Iqbal expressed support for the PDA’s position and acknowledged the adverse impacts of the current taxation policy. He reaffirmed dairy’s strategic importance in food security, economic development, and export growth, and emphasised the need for a comprehensive long-term dairy policy to ensure consumer health, sectoral sustainability, and farmer resilience.

Encouraging collaboration with the Planning Ministry, Iqbal proposed co-developing a roadmap for the formalisation and growth of the dairy industry. He also endorsed the launch of a School Milk Programme as a targeted intervention to boost child nutrition, school attendance, and cognitive development while stimulating demand for packaged milk. “With the right incentives, Pakistan’s dairy sector can be put on a path to formalisation, leading to better nutrition outcomes and enhanced export competitiveness,” Iqbal said.

The PDA welcomed the minister’s commitment and reiterated its willingness to work closely with the government on data-driven, inclusive policy solutions aligned with international best practices. The association stressed that a supportive regulatory framework is essential to realising the sector’s full potential and ensuring mutual benefit for consumers, farmers and the broader economy.