Modernizing the Dairy Sector

This study titled ‘Modernizing the Dairy Sector: Making safe milk and its value-added products ubiquitously available in Pakistan’ has been completed by The Pakistan Business Council (PBC) as part of its “Make-in-Pakistan” initiative. To carry out this sector study, PBC conducted discussions with the stakeholders and secondary research. The study highlights the opportunity in the dairy sector to increase value addition and makes corresponding policy recommendations.

The development of the dairy sector is not just important for the growth of Pakistan’s agricultural economy but also to ensure that the people of Pakistan are well-nourished. With just five percent of the total milk stock being currently processed, there is an opportunity to increase the availability of locally produced dairy products. Measures can be taken to increase the volume of milk being channeled through the formal supply-chain, curtail wastage and adulteration, and increase the production of value-added dairy products such as powdered milk which also helps alleviate seasonal milk shortage. By encouraging the formal dairy sector to process more milk into value-added products, consumers in Pakistan will have safe and nutritious milk and dairy products available for better nourishment. The formal dairy sector is also better positioned to reduce the environmental impact of dairy farming which is gaining considerable attention.

Pakistan faces shortage of milk due to the seasonal fluctuation in demand and supply. At present, the informal market players adulterate milk and dairy companies import milk powder to reduce this demand-supply gap. The seasonal shortage of milk can be reduced by adopting better livestock and feed management practices and domestically producing more milk powder in the flush season and reconstituting it during the lean season to meet high demand.

The milk yield of Pakistan’s local breeds is about four times lower than that of the high-yielding international breeds. To increase milk yield, the dairy farmers can either import high-yielding breeds or genetically improve the local breeds through the process of artificial insemination, which at present is not common in Pakistan. The productivity is also affected by limited access to vaccines and veterinary extension services.

Of the total milk produced, only four percent (eight percent of the tradable milk) is pasteurized and UHT treated and another one percent is used in the production of other value-added dairy products. Around 15 percent of the total milk produced is wasted due to improper storage and handling. To reduce wastage of milk, it is important to encourage dairy processing by implementing and enforcing pasteurization laws by the provinces.

The federal and provincial governments need to formulate a long-term dairy plan to be consistently implemented over time. Sectoral growth strategies applied by Turkey and India provide good guidance for increasing dairy production. With appropriate policy measures, Pakistan can ensure sufficient production of milk and value-added dairy products. The key policy recommendations are summarized below.

  1. Conduct a national livestock census once every five years in order to formulate, implement and scale growth strategies that are more effective than those based on estimated data.
  2. Restrict export of animal feed and its components, including maize and encourage its utilization to make a balanced diet for animals in order to improve milk yield.
  3. Ease import of animal vaccines by minimizing documentation and time delays in completion of import procedures.
  4. Increase import duty on milk powder and encourage dairy processing companies to produce it locally during the period of milk shortage. The imposition of import duties may be kept conditional on Pakistan first producing enough milk powder to sustain consumption in the summer months.
  5. Ensure the implementation of the pasteurization law in Pakistan by establishing pasteurization infrastructure at milk sourcing points in the rural areas to encourage dairy processing and reduce wastage of milk in Pakistan.
  6. Roll-out a nation-wide FMD vaccination drive to improve animal productivity and milk production in Pakistan. The federal government, in coordination with the federating units, needs to ensure adequate availability and effective administration of animal vaccines across the country.
  7. Encourage consumption of pasteurized and UHT treated milk by carrying out awareness campaigns among the general public regarding the harmful effects of raw adulterated milk and health benefits of pasteurized and UHT treated milk. To make this happen, consistent efforts are required by the federal and provincial governments to run such awareness campaigns through various mediums.
  8. Create awareness regarding the environmental impact of the dairy sector to reduce GHG emissions that contribute to climate change. The provincial governments can create awareness regarding the environmental impact of dairy activities and encourage the sector to adopt mitigating measures. The provincial livestock departments’ advisory wing should run the awareness campaigns across the provinces through various mediums.
  9. Provide subsidized financing to small and medium sized farms to import high-yielding dairy breeds and for capital investments to set up large farms. Larger farm size will generate economies of scale for dairy farms. This will attract farm level investments in the sector and eventually increase milk production.
  10. Formulate a National Dairy Plan under the overarching policy contours that are mentioned above in order to support their implementation across provinces. The plan should be implemented in phases over a period of 20 years. The phases should consist of a series of initiatives such as: improved breeding programs and access to silage, control on sale of adulterated milk, establishment of milk collection centers and access to working capital financing. The proposed dairy plan should be formulated and implemented by the provincial livestock departments. The implementation of this plan will require consistent commitment by the present and future governments.

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The PBC is a private sector not-for-profit advocacy platform set-up in 2005 by 14 (now 87) of Pakistan’s largest businesses. PBC’s research-based advocacy supports measures which improve Pakistani industry’s regional and global competitiveness.