Once believed to be the harbinger of the ‘White Revolution’, lifting the country or at least rural Punjab out of poverty, there is great flux in the dairy sector today despite its many successes. In the last decade or so, the processing industry has not been able to grow beyond six to seven percent of total milk production. Non-dairy products, disguised as milk goods, have mushroomed at breathtaking speed, even replacing milk in the market. Massive and cheap import of the skimmed milk powder (SMP) has hit the very basis of livestock farming, throwing many out of the very business. These issues are in addition to a long list of structural issues that have afflicted the sector for the past seven decades.

Last month, the World Bank (WB) under its upcoming fresh loan programme ‘Strengthening Markets for Agriculture and Rural Transformation in Punjab (SMART Punjab)-Programme for Results (PforR)’ noted that livestock development in Punjab has been largely stagnant over the past decade. The WB makes the claim that production increase is a result of herd size having increased rather than productivity having increased. It also observed that small dairy farmers are hardly integrated in the formal economy, and further, that institutional strengthening is the need of the hour.

Much of the murkiness around the dairy sector stems from an inaccurate assessment of numbers — of farmers, animal population, cattle sizes and so on. The last livestock census was carried out in 2006; it ought to have been conducted last year, 2016, after a period of 10 years. Numbers that exist today are all estimates — including statistics released in the Pakistan Economic Survey, 2015 — 2016.

Despite being the third largest producer of milk in the world, Pakistan has been importing dry milk and whey powder

The absence of reliable numbers has, in turn, had a profound impact on policy and planning. Official circles, particularly in Punjab, added a new layer of confusion back in 2015 when its official denied the federal government’s estimates on animal population in Punjab and, by extension, milk production figures — hitherto accepted as true by both national and international agencies. The problems of the diary sector have grown faster than the sector.

As the situation stands right now, no one seems satisfied. The industry bemoans the highest cost of milk production in the region, which hinders its expansion at the desired speed. Farmers say that the industry does not pay them enough to keep farming alive because the government has facilitated cheaper import options than buying local milk. The end result: Despite being the third largest producer of milk in the world, Pakistan has been importing dry milk and whey powder.

Both jointly blame the government but from their respective perspectives: the industry maintains that the government neither provides legal standardisation for the sale of milk nor does it have any backend support for farmers to set the supply chain right. Both factors are essential for growth.

On the other hand, farmers allege that the government, under pressure from the industry, has kept open cheaper import options such as SMP. This helps industrial profits grow vertically rather than facilitating its horizontal expansion for the benefit of the sector.

However, both still agree that the sector has strengths of its own and can grow leaps and bounds if, what they call, an enabling environment is created. After all, Pakistan has as many animals as its human population. Around one-third of the animals are slaughtered every year and replenished because of the inherent strength of the sector.

The ‘enabling environment’, however, is defined differently by the industry and the farmers. The industry thinks that it means regulatory mechanism, defining standards of milk and milk-products as well as mechanisms and support for farmers to meet those standards. For farmers, it is the money: they want big players of the industry to be reined in and made to pay farmers their rightful dues. This translates into linking the purchase price of milk to that of sale price in the market.

“The government has to provide support to farmers in two ways,” suggests an executive at a multinational, who did not want to be named because he was not officially allowed to comment on the subject. Firstly, he says, it has to define milk standards — how much fat it should include, how it should be preserved before sending it to the market, how should the supply chain be managed etc. Once these regulations are in place, the next step has to be creating a mechanism to implement it. “Unless these vital steps are not taken, the sector, which is almost completely un-organised — small herds, spread far and wide across the country — would remain chaotic,” he fears.

The executive’s second argument is for the government to join hands with farmers through some kind of cooperatives. Large farmer groups would have better bargaining power vis-à-vis industry as far as price of their product is concerned and the industry would benefit from bulk supply — cutting its cost of collection. “At present, there are no milk standards against which the industry should pay and milk collection is a painfully tedious and costly process,” he concludes.

“Both these steps would certainly bring sanity to the supply chain,” agrees Muhammad Faiz, a livestock farmer from suburban Lahore. He says that what hinders growth to this desired level is the attitude of the industry, in collusion with the government. The government, through a set of duties and regulation, has allowed the industry to import alternatives — skimmed milk powder, for one.

“This cheap import facilitates the industry at two levels,” explains Faiz. “It is dirt cheap to manufacture milk from these products and save the industry from collection hazards and costs. It also takes out seasonal and natural fluctuations in milk production for the industry. Why should the industry take the pain of lengthy and costly milk collection when a cheap option is available?”

This dynamic is precisely what hinders the growth of the sector, argues the dairy farmer, not other factors. “Aspects such as the sector being disorganised has played some role in the dairy sector’s lack of growth but what is the incentive in being organized when the industry is simply not interested in milk purchase?” he says rhetorically.

Indeed, countries such as India and Turkey have kept close to 100 percent duty on SMP only to save their farmers. In Pakistan, after massive pressure from farmers — don’t forgetting spilling of milk on the roads of Islamabad right before the parliamentary building — the government increased the import duty from 25 percent to 45 percent in the last budget. “But that is hardly what farmers wanted and protested for; milk manufacturing is still cheaper than purchase and would continue hurting the farmers,” laments Faiz.

Beyond this debate between farmers and the industry, which centres around who makes what and at the cost of whom, some other realities of the sector also need addressing if the sector has to grow out of the current morass. In Punjab, the sector low productivity and lower profitability because of these inherent issues. The livestock productivity, as experts put it, is a matter of four factors — breeding, nutrition, health and husbandry management. The province, unfortunately, is falling short on all four accounts.

Similarly, the exact population of animals in the country is still a matter of controversy. The pedigree of most of the herd — decisive for ascertaining and increasing milk production — is grossly polluted. Pre-emptive medical services are almost non-existent. Post-disease medical cover of animals is in even worse shape and animal diseases long controlled by the world are prevalent across the country. All these issues have to be addressed before going any further.

Apart from the numbers controversy, the country and especially Punjab have to account for low productivity and low profitability of the sector so that the private sector can own it, take it over and develop it further — needless to say under the vigilant eyes of officialdom. Punjab is still crucial to national planning because, at least officially, it holds around 80 percent of national livestock but it is beset with deeper structural issues that are mostly unattended. Unless they are addressed, no amount of regularisation or business development will work.

As far as breeding is concerned, official services only cover seven percent of buffalo and 26 percent of the cattle. The rest of the animals depend on private bulls (of unknown parentage) for reproduction — polluting genetic lines and hampering health and productivity of two main milk-yielding animals. Due to paucity of bulls, the insemination cycle of buffalos and cows routinely spans four to five years against 15-18 months in the developed world, driving production further downwards.

The situation on the nutrition front is not any better: some 71 percent of livestock farmers are either landless (38 percent) or own less than five acres (33 percent) land. It means that over 70 percent animals are mal- or under-nourished — mainly depending on casual grazing, affecting their health and productivity. Only 30 percent of them enjoy the luxury of silage-based diet. Couple this diet pattern with impure parentage, and the poor performance of these animals is not hard to understand.

The health front also leaves much to be desired. Only 16 percent of stock is vaccinated and the rest remain on curative regimes. Of late, Punjab has made greater strides in vaccination and claims much higher figures. But traditionally, the situation has been as bad as cited above.

The official agencies in Pakistan and Punjab have turned planning of the developed world on its head. Across the world, the public sector concentrates on vaccination while leaving cure and care to the private sector. In Pakistan, the entire official effort is riveted on cure because it involves huge purchases. That is why the official agencies, with their entire wherewithal, have not been able to control age-old diseases since vaccination has not been a priority. Things are slowly changing though.

However, the less said about husbandry management, the better. Farmers neither have training or awareness, nor do they have access to extension services or technology. Experts the world over believe that animals must have access to water round the clock and be fed thrice a day. With this one step, they argue, milk yield can go up by one litre a day. In Pakistan’s rural areas, the opposite holds true: most animals have access to feed 24 hours a day but are taken to drink water only once a day.

The profitability factor in the sector is even worse for the farmers. All the above-mentioned factors ensure that productivity remains as low as being on the bottom of world ranking. In Pakistan, yearly lactication of an animal is 1,200 litres against 9,500 litres in the EU or Australia. Out of 35 billion litres, only six to seven percent is processed with 70 percent sold through the middleman.

The sector is thus suffering some structural and some tactical issues. All of them have remained largely unaddressed. In the absence of curative process for them, how can business flourish is anybody’s guess — and everyone keeps guessing.

Published in Dawn, EOS, March 19th, 2017