KARACHI: Pakistan Dairy Association PDA has welcomed the government’s decision to revert to Zero Rated Tax on the processed milk industry.
It said in a statement that the decision to reinstate Zero Rating, as a part of the 20132014 Budget, would positively impact the dairy sector. The new tax policy would reduce costs of the milk processing industry and the price of packaged milk would be kept in check.
The Pakistan Dairy Association has thanked the government for reinstating the Zero Rating regime as this would sustain continuous growth of the dairy sector and good quality milk would continue to be available to the consumer at an affordable cost. The Association said the decision would also have a positive effect on the dairy sector and the government would stand to earn more revenues as a result. The dairy farmers across the country would greatly benefit from this decision and increased foreign investment in the industry would pave the way for the ‘White Revolution’ with benefits for all stakeholders.
Pakistan is the world’s third largest milk producer and has an annual output of 46 billion liters. Milk is essential for human consumption as it provides calcium, key vitamins and iron and is a child’s first food. In most developing and developed countries, such as India, UK, USA, Canada, etc., milk is subsidized because it is an essential food item.
The decision to revert to Zero Rating will cause government revenues coming from the processed dairy industry to rise substantially. It needs to be remembered that some 96% of the country’s milk industry is still represented by unprocessed milk producers who do not pay any tax and do not come under the tax net.
According to the Pakistan Dairy Association, in the absence of zero rating, the price of one liter of unprocessed/unpackaged milk would have increased considerably, resulting in a directly proportional increase in the price of processed/packaged milk. The inflation and associated multiplier effect would have adversely impacted the entire value chain, beginning with the farmer and ending with the consumer. Some 600,000 dairy farmers, mostly located in Punjab and Sindh, would have suffered as there would have been a decrease in the demand for milk as a result of the price rise.
In Pakistan, since refrigeration is not available in most homes, ultrahigh treated UHT/packaged milk is needed for it to be transported over long distances especially to the northern regions of Pakistan. More than 70 percent of UHT milk is sold in smaller packs including quarter litre, which is purchased by the poor for their daily consumption.
PDA had earlier feared that foreign and local investment in the dairy sector would have been discouraged if tax were imposed on the dairy sector and the benefits of the “white revolution” would not have benefited farmers, with the result that consumers would have been deprived of affordable and quality milk.
The PDA says that Zero Rating on packaged milk products would contribute to the livelihood of millions of farmers and industries related to breeding, feeding and milking equipment will also expand. This will increase direct investment in the dairy processing sector and enhance the quality of milk as well as production capacity, leading to decrease in rural poverty and increase in GDP.