Dairy sector fears Rs5bln annual dent from budgetary measures

LAHORE: Dairy businesses on Saturday lamented over budgetary measures that are expected to axe an estimated five billion rupees from the sector to the detriment of farmers and consumers.

The government proposed increase in sales tax to 17 percent from 10 percent though the sector was expecting zero-rated status.

The budget negatively impacts dairy sector to the tune of approximately Rs5 billion and Rs15 billion in three years, according to the industry officials.

This will fuel inflation and tantamount to taxing “health of nation,” said an official.

According to industry estimates, sales tax of 17 percent will imply Rs700 million impact on cream products, Rs700 million on fortified dairy powders, Rs400 million on yoghurts, Rs700 millon flavoured milk, and Rs1.5 billion on tea cream.

The government previously assured of its support to address the issues of dairy producers and processors by providing them a level playing field and an enabling environment to increase milk production.

Pakistan is the fourth largest milk producer in the world where as over eight million families are making a living out of the milk produced by their cows. Dairy contributes about 11 percent to GDP.

The far-reaching impact of putting additional financial burden on the dairy value chain will have a ripple effect up to dairy farmers. The livelihood of dairy farmers will be adversely affected and so will be the initiative of the present government to ensure intake of proper nutrition to the masses. Dairy and milk products lead to a healthy nation. Therefore, the sector has always been in the priority list of most of the governments when it comes to evolving policy for their progress. With high taxation the consumption of nutrition would surely be reduced as it would have extra burden on the pocket of the public.

An official of a food processing industry said that taxing dairy simply means taxing nutrition as it is a pass on cost. He reminded the government that such a drastic taxation measure would have far reaching consequences on dairy sector as it contributed to 11 percent of the GDP.

He lamented that dairy sector had asked for Rs3.5 billion support from the government in its budget proposal through positive measures in budget 2021. The dairy industry buys two billion litres of milk annually across the country involving as many as 300,000 farmer families including small and commercial farmers and owners of mega-farms.