Dairy industry and private sector
By Sarfaraz A. Rehman
On the supply side, much of the traded milk is marketed unprocessed, and hardly three per cent is processed by the dairy industry. Hence no value addition is taking place.
As it appears, the demand for dairy products will continue to outpace supply. The industry today estimates that the current gap of 250 mio litres will balloon to a massive shortfall of 3.56 bio litres in less than seven years. The current non-commercialised scattered farm network is not geared to avert this looming crisis.
The second major challenge facing local dairy is quality. Milk marketing is dominated by the informal private sector, consisting of agents such as collectors, middlemen, and traders. Alarming rates of adulteration have been witnessed in the last few years especially in the central Punjab region.
There is no quality check at any stage along this chain. For example, those who handle milk right from the beginning till it reaches the final consumer are not conscious of hygiene. As a result, the average TPC — bacteria count - is at least 60 times higher than that in the Middle East, thereby making the issue of poor quality the biggest hurdle for dairy exports.
Pricing is the most serious challenge that organised dairy faces today. Despite a single digit processed milk market share, factory gate prices have increased by at least 20 per cent per annum since 2006. This situation is exacerbated by the fact that the government and industry’s efforts to improve milk supply have been based on the questionable premise that annual milk production is at least 32 bio litres of which 40 per cent is wasted due to poor infrastructure.
Efforts to improve this dairy landscape and the entry of dairy players have partially contributed to severe upheavals, resulting in price increases, and major adulteration by the informal sector and short-term animal malpractices.
Each of the above challenges has a prescription. The milk industry today recognises that the barriers to sustainable dairy development impact milk supply, milk quality and price. On the supply side, the absence of infrastructure and utilities support in the milk shed areas is an urgent priority for the government. A recommended approach would be the prioritisation of milk shed areas for developmental investments in utilities access, tube welling and electrification programmes.
The encouragement of dairy breeding farms at the same time would offset animal malpractices such as increased culling trend predicted to erode our herd base in the near future. Finally, the government again would need to play a critical role of enforcing dairy financing targets set for financial institutions.
The challenge of improving milk quality requires a strategic change. It is in this initiative that dairy industry can play a pivotal role. While the industry strongly believes in participating in developmental programmes and in working in tandem with the government in the establishment of independent agencies, mandated to ameliorate poor breeding practices resulting in low yield animals, but the end results have not been encouraging.
The government’s experience in making available attractive incentives to individual farmer for chiller infrastructure has not been encouraging. Remedies would include herd registration, the concentration on phenotype — local breeds having the capacity to improve yield -- in the selection criteria and making available ‘bull stations’ nationwide. This would improve the breeding element, provide greater numbers of good animals and in the end result in improvement of milk volumes and quality.
An immediate ban on export and slaughter of female breeding stock is possible along with the release of government land for breeding farms. Similarly, a regulatory framework establishing a milk procurement standard is a quick remedy and supported by the industry. Regulation regarding the efficacy of animal health medicine can also be passed by our government in the short-term.
However, in the medium-term, the government would have to make concentrated efforts in upgrading dairy knowledge and technical skills. Despite the country’s high-ranking in milk production,, there is a real dearth in local knowledge and technical skill. Not only would dairy departments have to be incorporated in existing agricultural universities but also a dedicated effort would have to be made in updating curriculum and awarding recognition to the resulting certification. The industry today has proven the critical role expatriate trainers/experts can play in this regard.
The absence of private sector in dairy farming is a major hurdle to achieving economies of scale in dairy. It is here that the private enterprise today can play the real role of a change agent especially in the current scenario of the non-commercialised scattered farm network’s inability to yield effective production increases.
By awarding “agricultural industry” status to the dairy sector, the government would effectively establish incentives and policies supporting dairy farming on a wider scale. The initiation of a Five-Year Plan setting targets and benchmarks for achievement will focus efforts in this sector.
The dairy industry strongly believes that active participation in this public/private enterprise is the most effective step to creating a successful road map for dairy leading to competitive, sustainable dairy exports.
Despite all the problems it faces, the dairy sector holds high promise as a dependable source of livelihood for the majority of the population. Pakistan needs to enhance their competitive economic advantage in dairy products, in terms of both quality and cost, and to enhance their acceptance in international markets.
The role of government should be to direct, co-ordinate and regulate the activities of various organisations engaged in dairy development, to establish and maintain a level playing field for all stakeholders and to create and maintain a congenial socio-economic, institutional and political environment.
Sarfaraz A. Rehman is the Chief Executive Officer of Engro Foods (Pvt.) Ltd.