PDA seeks cut in packaged milk tax to 5pc

Business Recorder

5 hours ago

LAHORE: The Pakistan Dairy Association (PDA) on Wednesday urged the government to immediately reduce the 18 percent sales tax on packaged milk to just 5 percent to provide relief to consumers, stimulate industrial activity, and generate higher revenue for the national exchequer.
Under the Finance Act 2024, both liquid and powdered milk have shifted from zero-rated to an 18 percent sales tax. According to PDA representatives, this rate is not only excessive but also unprecedented globally. 'No developed or developing country imposes such a high tax on a basic nutritional commodity like milk,' they said.
'Since the imposition of this tax, the price of a one-liter pack of milk has surged from Rs 280 to Rs 350. If the industry's suggestion to reduce the tax is accepted, prices could potentially drop by Rs 50 per liter,' said PDA Chairman Usman Zaheer, along with CEO Dr. Shahzad Iqbal, Dr Nasir, Mian Mitha, and Noor Aftab, while addressing a press conference.
Zaheer highlighted that the formal dairy industry has already reduced its milk procurement from farmers by 20 percent due to the increased tax burden. This has forced nearly 35 percent of farmers to unregulated loose milk trade from formal market. Consequently, around 20 percent of milk collection centers have shut down, disproportionately impacting small-scale dairy farmers. In addition, farmers have lost quality and safety-based incentives worth Rs 10 to 15 per liter, while prices of loose milk have climbed by Rs 30 to 40 per liter - profits that do not benefit the producers. This policy has also discouraged farm productivity and long-term investment in the dairy sector.
Citing a Nielsen study, Zaheer pointed out that two-thirds of Pakistani consumers earn less than Rs 50,000 per month. With prices now higher, many low- and middle-income families are forced to turn to loose milk which lacks quality control and safety assurances. 'Milk - one of the most nutritious staples in the average food basket - has now become unaffordable for many,' he said.
PDA CEO Shahzad Iqbal added that the formal dairy industry is now facing serious setbacks and has shelved an annual investment of Rs 1.3 billion meant for farm development and support. With processing plants now operating at less than 50 percent capacity and profits under severe pressure, many companies have halted investment in branding and innovation over the past two quarters. Around 20 percent of employees in the formal dairy sector have already been laid off, and an annual Rs 400 million investment in consumer conversion programs has also been abandoned. This, Iqbal warned, is putting Pakistan's $30 billion dairy export potential at serious risk.
He further said the informal sector - gawalas and shopkeepers - is now generating nearly Rs 1,319 billion annually due to the gap created by the tax on formal milk. 'The widening price gap and lack of enforcement are driving consumers toward unsafe loose milk, which not only endangers public health but also strengthens the undocumented economy,' he cautioned.
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