In a recent interview with BR Research, Sulaiman Monnoo, Senior Vice Chairman of Pakistan Dairy Association demanded that prices of loose milk be de-regularized and de-capped to incentivize investments in Pakistan’s dairy sector, be it towards UHT, pasteurised or fresh & chilled milk options. (See this paper’s Brief Recording section May 24, 2019)
This is a classic example of a failed governance mindset that is keeping investments, including FDI, at bay. And it cannot be fixed only by improving ease-of-doing-business-type indicators or tweaking tax rates relevant to the sector. This requires an appreciation of the trade-offs in question, informing the consumers of the same to create a political buy-in, and accordingly arriving at a solution through a process that is informed by consensus. What is the trade-offs in question that Mr. Monnoo was alluding to?
Before getting down to that, it is pertinent to highlight that prices of loose milk are fixed by district government, which begs the question how can an official from district management group of civil services set the price of milk when they hardly know anything about dairy, beef business in particular, and livestock in general. Was their initial academic training in dairy and beef industry? No! Do they receive training in these sectors after they joined the service? No! And it’s not surprising. After all this is a country that does not even boast highly trained tax and power sector officials, two of the hottest issues facing the country.
Bear also in mind that for small farmers who supply to loose milk industry, input prices, which in the case of most inputs rise faster than output prices, are not government controlled; only the output prices are controlled. This leads to two pronged problems.
Because of controlled output prices, the farmers don’t have adequate incentive to provide good quality feed. Either they resort to feeding their animals’ toxin-laden food, such as cotton seed cake, which badly affects the calving frequency of the animal in addition to passing on those toxins to humans. Or they resort to cheap feed that doesn’t have the necessary nutritional factors the right milk yield, and keeping the cow healthy for subsequent calving.
As is the case with humans, if the cow is undernourished, her calf will also be unhealthy and unable to produce sufficient quality and quantity of milk. Compound that process for a decade, and you have a livestock supply crisis in the waiting.
The second end of the problem is the quality of milk itself. In a background conversation with BR Research a few months ago, Imran Basharat, General Secretary of Sahiwal Cattle Breeders Association, described the following horrifying process of milk collection and quality of loose milk that reaches homes, and ‘dhabas.’
“The middleman collects milk from small farmers from their doorsteps at about Rs50-Rs60 depending upon region to region. This middleman collects milk on his motorbike, with two drums of 40 litres capacity each on the sides of his bike. Those drums are not built for this purpose; nor are these drums kept clean.”
Later, in order to save the quality of milk, “the middleman adds a host of other things such as hydrogen peroxide, soda bicarbonate, caustic soda, formalin, to reduce risks of milk going bad”. And then “he adds up to 40 percent cow milk to the buffalo milk that he purchased to bring down the average cost of purchase since cow milk is cheaper. The quality only goes bad from here in the loose milk industry. For instance, there are those who add water, whey powder and what not,” and mix these using laundry machines.
The description given by Basharat holds truth for Punjab and some parts of Sindh as well, save for urban centres such as Karachi, where the process of milk collection is different, but the quality of milk is little different in terms of adulteration.
Granted that deregulation of loose milk prices is not a pill that cures all. But it’s a start to at least create a field where farmers, middlemen and retailers can compete on quality if they want. There may still be black sheep in the market who would continue to give bad feed to animals and do adulteration. But that end of the equation can be fixed with other regulatory measures.
There are no short cuts to dairy reforms, whereas urgency of the issue is profound. As a result of poor quality of milk, Pakistani children are getting poor nutrition, often even stunted, an issue for which PM Khan has expressed his deepest concerns. But neither the government, nor the consumers of loose milk realise that they are effectively paying the same price of milk had prices not been controlled, because to quote Basharat they are effectively “getting only half litre of good milk mixed with various adulterations for the price of one litre milk”. This trade-off needs to be explained to all and sundry across the lengths and breadths of the country.
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