Muhammad Zubair from Daroghawala is a young entrepreneur in dairy farming. After the death of his father some years ago, he converted his about one hectare agriculture land at Mahmood Booti into a dairy farm where he is rearing a herd of 14 cows and buffaloes. The now 22-year-old says being a student and the only male member of his family, he could not continue doing ‘time-consuming’ agriculture at a younger age on over two hectares of land he inherited from his father. So he sold out half of the piece of land, purchased milch animals from the sale proceeds and ventured into dairy farming. With the help of an employee, he is tending to his herd, milking the animals and selling the produce directly in nearby posh areas of the city for the last couple of years to eke out a living.

Livestock, as a sub-sector of the agriculture sector, contributes over 11 per cent to the gross domestic product (GDP) and around eight million families as per Pakistan Economic Survey 2019-20 are making their living out of the milk produced by their cows and buffaloes. Most of these are doing subsistence level dairy farming, on an average earning up to 40 per cent of their livelihood from milk production.

Zubair is among around seven per cent of the households owning herds between 11 and 15 animals as per the livestock census held in 2006. Small dairy farmers are facing issues of poor quality of cattle that lag far behind in producing milk as compared with the species being reared in Australia and European countries, a lack of resources to buy costlier but nutritious feed for their animals and no access to easy bank loans needed to import dairy machinery, increase size of herd and improve farm conditions.

On an average Zubair gets seven litres of milk per animal per day and the ratio drops during summers because of shortage of fodder, while milk and milk products like yogurt and lassi are in high demand during that time of the year. He claims that many of his attempts to get bank loans on soft terms for increasing his herd size to make it more economical remained abortive. The credit issue is not specific to small farmers who have no collateral to pledge against bank loans.

Mushtaq Gondal, who has recently set up a dairy farm containing 500- plus animals, tells Dawn that he is running from pillar to post seeking a soft credit line to introduce mechanisation at his farm. “The banks do extend credit but the mark-up they charge is too high particularly for a start-up.”

Milk processors are also not free from trouble as once a thriving sector the milk industry is on the decline since abolition of the zero-rated regime in the year 2016. The widening gap between the packaged and raw milk due to 10 per cent sales tax on the former is forcing downward sales of the processed milk. Most of the dairy processors are reporting financial losses.

Pakistan is the fourth largest milk producer in the world but with the highest gate price, laments Pakistan Dairy Association president Dr Shehzad Amin, while complaining that the quality of milk the industry is procuring from the farmers doesn’t match even the SNF (solids non-fat) standards prescribed by the Punjab Food Authority (PFA). Low-yield and poorly-fed animals are keeping milk price higher.

Dr Amin says the industry is working on just 40 per cent of its capacity as the abolition of zero-rate regime, it had been enjoying since 2006, has hit it hard plummeting sales of packaged milk. The tax facility had been withdrawn through finance acts of 2015 and 2016. To make the matters worse, the PTI government increased the mark-up rate for the loans taken by the dairy processors.

The PDA president says the association had taken up the taxation issue with former advisor to PM for finance Hafeez Sheikh well before the 2020-21 budget to save the industry from collapse. “On the direction of Mr Sheikh, a committee was formed to review sales tax on the packaged and pasteurized milk and it presented its recommendations to the government before the budget but the same were not incorporated into the finance act.”

He says a PDA delegation has recently met President Arif Alvi in a renewed bid to convince the authorities to reverse taxes on the sector facing gradual cut in its already low market share (presently it stands at 7pc). He argues that keeping in view pandemic malnutrition leading to stunting of children in the country the government should rather incentivize and subsidize the industry so that quality and hygienically packed milk and its products are available to the people at affordable prices.

Besides public health, he argues, the issue also pertains to alleviating rural poverty and increasing government revenue. He claims that a 1% increase in its market share results in additional 600 million litres of milk collection, pumping of Rs36 billion into the rural economy, creation of 2,500 direct jobs and Rs6 billion per annum increase in direct taxes for the government.

“If the government decides to restore the zero-rated regime, the income tax contribution of the dairy sector will jump from Rs14.7 billion to Rs41.7 billion due to increase in sales over the next five years,” he adds.

Published in Dawn, May 4th, 2021