Packaged milk now costs Rs. 370 per liter. This is a Rs. 75 increase. The price hike results from the new government budget. FrieslandCampina Engro Pakistan Limited raised prices on July 1, 2024. Rising production costs and economic factors caused this increase.
Other milk companies also raised prices. This results from an 18 percent sales tax and 2.5 percent retailer tax. The government proposed a tax on infant milk too. This tax applies if the price is under Rs. 600 per 200g. The total revenue from these taxes will be Rs. 95 billion. This includes Rs. 75 billion from standard milk and Rs. 20 billion from infant milk.
These rates are very high. Finance Minister Muhammad Aurangzeb said the middle class can afford the 18 percent sales tax. The PML-N-led government introduced a tax burden of over Rs. 250 billion. This tax affects milk consumers. It applies an 18% GST on every liter of packaged milk. This decision raises concerns about nutrition. This is due to the country’s high child stunting rate of 40%.
Packaged Milk Consumers Face Steep Hike
Packaged milk makes up a small portion of total milk consumption. The government expects to collect Rs. 75 billion from this tax. The remaining Rs. 175 billion will benefit milkmen. Malik Amjad Zubair Tiwana, Chairman of the FBR, confirmed this. The 18% GST will generate Rs. 75 billion in the next fiscal year. This is equivalent to the budget allocation for parliamentarians’ schemes.
The Pakistan Dairy Association (PDA) says the new tax could increase packaged milk prices. Prices could rise by Rs. 50-70 per liter. Milkmen could raise prices by at least Rs. 30 per liter. This would force consumers to pay an extra Rs. 250 billion for milk.
The price for a 1000ml pack of Olper’s milk will be increased as per the new rates detailed below:
| Consumer Price | Price for Un-Registered Retailer | Price for Registered Retailer |
Packs/Carton |
Pack Size | Product | |||
| Rate/Pack | Rate/Carton | Rate/Pack | Rate/Carton | Rate/Pack | Rate/Carton | |||
| Rs. 370 | Rs. 4,440 | Rs. 353.45 | Rs. 4,241.38 | Rs. 346.55 | Rs. 4,158.62 | 12 | 1 Liter | |
Branded milk prices will rise to at least Rs. 340 per liter starting July 1. This may push consumers towards cheaper loose milk. Loose milk will still be Rs. 100 per liter cheaper than packaged milk. Finance Minister Aurangzeb argues that middle and upper-middle-income groups can afford the 18% GST. After the budget announcement, electricity prices increased. NEPRA raised electricity prices by Rs. 5.72 per unit. This added a Rs. 570 billion burden on households.
Exporters and Farmers Push Back Against Government Policy
The government also imposed an 18% tax on animal fodder and poultry feed. This will likely increase meat, milk, and chicken prices from July. The budget primarily targets cows and buffaloes, not major industries. Exporters are pressuring the government to change the tax. They want the government to withdraw the income tax and reinstate a fixed income tax.
The PDA criticized the 18% GST. They call it a disaster for public health and farmers. The tax affects the formal milk supply chain. Milk is crucial for addressing malnutrition. In Pakistan, over 90% of milk consumers rely on loose milk. The PDA advocates for a formal milk supply chain. They recommend income tax over GST for packaged milk.
This would avoid disadvantaging the taxed formal sector against untaxed loose milk. The proposed GST could reduce sales volume by 75%. This would harm profitability and deprive farmers of Rs. 23 billion in procurement due to decreased demand. Removing the sales tax would promote the formal sector’s growth.
To read our blog on “New taxes make leaving and living in Pakistan difficult,” click here
