An interview with Sulaiman Sadiq Monnoo, Senior Vice Chairman PDA

Mr. Sulaiman Sadiq Monnoo is the Senior Vice Chairman at Punjab Diary Association, which aims to empower and develop the small dairy farmers based on “one herd concept”. Mr. Sulaiman Monnoo is a business graduate with over 18 years of work experience and extensive knowledge of all current economic, social and regulatory issues. Possessing vast managing directorship and CEO experience, Mr. Sulaiman Monnoo is also the CEO of Dairyland (Pvt) Limited.

Following are the edited excerpts of a quick conversation with Mr. Sulaiman Monnoo regarding the dairy sector of Pakistan:

BR Research: Since dairy and livestock is a provincial subject, what is your assessment of the capacity of relevant provincial departments and the progress each province has made towards dairy and livestock development?

Sulaiman Sadiq Monnoo: The dairy sector is an important player in Pakistan’s economy that is primarily agriculture based. It represents 95 percent of the informal sector i.e. loose milk, and 5 percent of the organized sector i.e. packaged milk. The contribution of agriculture sector to Pakistan’s Gross Domestic Product (GDP), with its declining trend, still stands at 23 percent. Some 30–35 million of the rural population is engaged in raising livestock and it derives 30–40 percent of its income from this sector.

The provincial dairy and livestock departments are important in this regard with each department facing different challenges and varying capacity to address them. However, there is a need to ensure policy alignment among the federal and provincial Dairy and Livestock Development Departments to help the dairy industry meet its full potential.

BRR: What does market research say – what kind of milk do Pakistanis prefer – high fat or low fat – and are the trends changing?

SSM: If we look at the market share for a proxy of preference, full cream is more than 99 percent of the packaged UHT category whereas low fat continues to be a niche offering (2.8 percent value share of all branded milk) with not an impressive growth. Though as per modern and changing health preferences, the trend is moving towards the consumption of low-fat milk in some sections of the population in the urban areas only. Health-conscious urban citizens are changing their milk consumption habits. However, the overall trend of milk used in tea is for high-fat milk in urban and rural areas equally.

BRR: Which model works best for Pakistan? UHT or pasteurized? And why?

SSM: The answer to your question lies with the processed milk whether pasteurized or Ultra High Temperature (UHT) treated. Being very rich in nutrients, milk is not only a source of health for human beings but provides an ideal growth environment for many micro-organisms.

There are effective control measures that can minimize the risk to human health, key among then is pasteurization and/or UHT. Pasteurization is a process that involves heating milk at a particular high temperature for a required time to ensure killing of harmful bacteria that can cause severe damage to human health. Originally designed to ensure adequate destruction of common pathogenic micro-organisms, pasteurization can extend the shelf-life of milk by destroying almost all yeasts, molds and common spoilage bacteria.

However, keeping Pakistan’s climatic conditions and prolonged summers in mind with the consumer base widely spread across the country while the milk collection is mostly centered in Punjab, UHT is considered to be more suitable. As pasteurized milk requires very robust supply chain to maintain the temperature at around 40C, it becomes less feasible to market it to the masses. UHT is same as pasteurization; the only difference lies in the degree of temperature and the duration at which the milk is heated. UHT milk with aseptic packaging proves to be an optimum option for us as it can allow for the milk to be transported over long distances at ambient temperatures. The shelf-life of pasteurized milk is 7 days compared to 3 months of UHT Milk. UHT is also a better proposition for countries with similar climate conditions such as Turkey, Mexico, Spain etc.

BRR: Whose interest does your association represent; is it only UHT or pasteurized as well?

SSM: The Pakistan Dairy Association represents the organized milk sector. Despite being the fourth largest milk producing nation, only 5 percent of milk is processed and packed, rest of the 95 percent is unprocessed, unregulated and untaxed. PDA is an association that aims to promote and advocate the interests of the processed milk industry, whether UHT or pasteurized. PDA also represents the corporate farms and other dairy processors who are equally important in the overall growth of dairy sector.

BRR: Why is the UHT dairy milk industry not comfortable with the label on the pack that UHT is produced from powdered milk - there are many countries where this is being practiced – KSA & UAE being the nearest regional example.

SSM: The processed industry follows the national regulations, which suggest milk to have 8.5 percent Solid Non Fats (SNF) and 3.5 percent fats. However, most of the industry players collect milk from small and medium farmers who have their own set of challenges like unable to provide quality feed to animals; SNF ratio in milk lower than the required minimum level, etc. Also, due to the variance during flush and lean seasons, sometimes milk processors have to add skim milk powder to meet minimum SNF requirement in finished product.

In comparison, most of the loose milk available in the market is unregulated and does not comply with the minimum required criteria. The loose milk sellers add substandard substances to make up for the milk compositional requirements.

In GCC/Middle East, there are two sets of requirement. One is made from fresh milk while the other one is re-constituted. The reconstituted milk is completely produced from powder by adding water in it, which makes it binding on them to use the labeling accordingly. While the finished product milk produced from fresh milk has no binding to declare “re-constituted milk” on the label.

BRR: Even if loose milk pricing is de-regularized, the fact of the matter is that Pakistani livestock has very low yields which makes it difficult to invest in corporate farms (for UHT or pasteurized milk). This then means we have to improve our livestock. But that is a long-term process. Yet if we import cows on a large scale it would inflate our import bill - so what is the solution – insemination or embryo transfer?

SSM: Dairy industry is in the favour of de-regularizing and de-capping of milk prices as this will incentivize investments in the sector. To answer the other half of your question; it is important to understand that we have three distinct segments of milk farming in Pakistan. It is difficult to club it together as the economic and commercial rational of each segment differs widely.

Small hold farmers (having 2-3 animals) use traditional farming practices. Training and education related to animal husbandry, feed and nutrition would be essential for them to improve the yield. We have case studies suggesting over 25 percent improvement in less than 6 months by just giving basic education.

The mid-size or progressive farmers (having 20 milking animals) have understanding of breed and feed of the animal. For them, education and support related to artificial insemination, modern milking methods, feed, animal comfort etc. will be instrumental in improving the yield. The potential of improved yield per animal is again over 25 percent here.

The mega farms, which are mostly mechanized for imported pedigree and are owned by big industrialists, are generally competitive in terms of milk production but they are at daggers drawn with the regulatory and taxation regime. They will grow if there is enabling environment and support available to them. Plus, it is still a better option to import animals gradually than importing milk every year in terms of its impact on our exchequer.

BRR: Why Harmonization of Food Standards is required in Pakistan?

SSM: We believe that there should be one food standard i.e. National Food Standard, formulated after due consultation and consensus of all the provincial authorities, and notified by the federal government. However, the implementation (registration, licensing, and enforcement) of the same standard should remain a provincial subject. From industrial point of view, this will help in ‘ease of doing business’.

Given due importance to the subject, the issue of Harmonization of Food Standards has been taken up to the Council of Common Interest (CCI) where all chief ministers agreed to have one food standard across the country. Same has been discussed in the recent cabinet meeting. We’re hoping that this will soon be converted into a legal framework by the Ministry of Law and Justice.

BRR: We are told that the government has met twice with dairy and livestock industry stakeholders in Islamabad. What is the expected policy direction the government is thinking about?

SSM: As referred by the Prime Minister is his recent speech, about 75 percent of the loose milk is not safe for human consumption in Pakistan with one city identified as selling a milk like substance having no ingredients of milk but detergent and chemicals. The government also realizes that there is a serious need to bring the dairy farmers into the formal eco-system where they can work in partnership with companies to improve milk yield and health of the livestock in order to ensure quality milk supply.

In this regard, we have had positive meetings with Abdul Razak Dawood, where we proposed the revival of dairy sector by highlighting importance of zero rated taxing, harmonization of food standards etc. I think in the coming budget, we will be able to see some major changes in terms of fiscal policy and food policy towards the dairy industry.

We also meet with the relevant federal and provincial food authorities periodically to share our concerns and bring alignment to serve our consumers.

BRR: Tell us about the Punjab pasteurization law – when is it being enforced?

SSM: It is very important to set up a legal framework through introduction of a minimum pasteurization law for milk sales (even in the open market) to ensure consumer protection. Since the Punjab Food Authority (PFA) is very active in introducing legislation to protect the health of citizens, a pasteurization law could make a big difference. As per PFA regulations 2018, the implementation of Minimum Pasteurization Law is coming into force by July 2022. But I think now they want to expedite it based on government’s priority of improving the overall public health.

BRR: How critical is it to develop the packaged meat industry to develop the packaged milk industry?

SSM: Pakistan’s livestock sector has a lot of untapped potential and its efficiency should be expanded to fulfill a growing demand for milk and meat to improve the public health indicators. Despite being among the largest milk producing countries and having the largest number of milk producing animals, Pakistan faces severe malnutrition followed by shortage and poor quality of milk. It is estimated that only 45 percent of the milk produced is actually available for sale.

The packaged milk industry faces many problems that restrain its growth but the packaged meat industry is still very small and if serious steps are taken to develop it, it could really boost the packaged milk industry.

BRR: What tax reforms do you propose to strengthen the dairy industry?

SSM: Improper taxation is hurting the dairy industry with high prices of final products leading to a decline in the demand of the dairy items. It is obvious that the burden of price hike is shifted towards the consumers. In order to address this issue and provide some relief to the sector, the government should review its fiscal policy towards dairy industry; no duty or sales tax on animal feed, zero rating on local semen production, no sales tax on local and imported semen, and zero rated tax policy on dairy products.