Despite being world's third largest milk producing country, Pakistan has imported $341 million skimmed milk powder and whey powder in three years ie 2012, 2013 and 2014. According to UN Comtrade database, Pakistan imported in 2012 approximately 35 million kilogram worth $102.1 million; in 2013 approximately 22 million kg value $70.7 million and in 2014 approximately 33.5 million kg of $117 million skimmed milk and whey powder.
Whey powder imports have been 19.5 million kg valued at $13.4 million 2012, 18.3 million kg worth $15 million in 2013 and 21.6 million kilograms valued at $21 million in 2014. Currently there is only 20 percent import duty on import of skimmed milk and whey powder from Saarc countries and 25 percent duty for imports from other parts of the world which is the main reason why the country is fast becoming a dumping ground for dry milk powder from around the world. India has imposed 68 percent duty while Turkey has imposed 180 percent duty on import of dry milk powder of any kind to protect their local dairy farmers and to become a net exporter of dry milk powder.
In its last meeting, National Assembly (NA) Standing Committee on National Food Security and Research urged the government to impose 100 percent duty on the import of dry milk in the country. The members unanimously urged the government to discourage such imports which are badly hurting the local dairy farmers. "Import does not only damage the interest of local producers, but it is also a waste of foreign exchange," said MNA Rao Muhammad Ajmal Khan, a member of the committee. "We are world's third largest milk producer then why are we importing milk powder in our country," exclaimed Rao.
In the last few years import of skimmed milk powder has increased drastically and some of the local milk sellers have started to manufacture recipe UHT products using skimmed milk powder, whey powder and other ingredients. Confectionary and sweet shops have also shifted to cheaper and low quality SMP&WP replacing locally produced raw milk. An official of Ministry of National Food Security and Research told this scribe that Finance Ministry was taking an interest in dairy industry's woes as multinational companies were given a free hand to import as much skimmed milk and whey powder as they wanted.
He said milk processors spread the myth that dry milk powder was imported in Pakistan due to gap between supply and demand and seasonality of milk production in Pakistan. However, a careful look at import trend along with international prices of SMP & WP reveals a clear linkage with prices.
"As price of SMP & WP products drops in the international market, the imports in Pakistan shoot up and vice a versa. This means that cheap milk and whey powder is used to substitute the locally produce raw milk. The bulk of imported SMP & WP is being used by dairy processing industry to manufacture different products," he added. He further maintained that dairy farmers were already going through severe depression for not being able to get a reasonable price for their products and on top of it, Federal Board of Revenue (FBR), in order to expand the tax base, is considering eliminating dairy sector from the current regime of zero rating to exempt clause in the new tax policy proposal for fiscal year 2015-16.
"If milk is taken out of zero rating regime and considered as exempt, the input sales tax paid at the procurement stage will become un-claimable and will be part of the cost of production, thus increasing costs considerably. Dairy farming community fears that the raw milk buyers (dairy processors, confectioners, sweet makers, loose milk sellers) will reduce the purchase price of raw milk from the farmers in order to safe guard their profitability; which will be detrimental to the dairy farming industry," he continued.