A Brief on Dairy Sector
November 23, 2005

Sector Significance
Agriculture is the largest sector of the Pakistani economy, contributing 23 percent to the GDP and involving 42 percent of the total labor force. Livestock is the largest of the various agriculture sub sectors. Net foreign exchange earnings from livestock products and by products like meat, skins, hides etc were more than Rs. 53 billion in 2003-04 (Source: FAO-Economic & Social Department Reports) that is about 11 percent of the overall export earnings of the country.
Livestock accounts for 46.8 percent of agricultural value added and about 10.8 percent of the GDP. Milk is the largest commodity from the livestock sector accounting for 51 percent of the total value of the sector. The farm gate value of milk is estimated to be more than Rs. 390 billion.
Pakistan is the Fifth largest producer of milk in the world with a total production of 28 billion liter of milk a year, whose value is more than that of the combined value of wheat and cotton, from a total herd size of 27 million milch animals (buffaloes and cows).
There is a consensus among the stakeholders and the development experts that Pakistan’s Dairy Sector has immense potential for growth. The same has not been realized due to various gaps. The vital missing link being lack of shared vision and strategy for the development and lack of effective collaboration among the stakeholders including support institutions and the government agencies to implement the agreed strategy.

Strategy Development:
Realizing the significance of the sector in terms of contribution to GDP, employment and importance to serve as a vehicle to alleviate poverty especially among the rural population, Ministry of Industries, Productions and Special Initiatives Government of Pakistan identified Dairy Sector as one of the key sectors for development on priority basis. A Strategy Working Group (SWOG) was constituted by Federal Minister for Industries, Production and Special Initiatives Mr. Jahangir Khan Tareen to develop Diary Sector Development Strategy. The SWOG includes members from prominent stakeholders of the Dairy Industry who are working together voluntarily to identify issues and propose strategic framework to up-grade Dairy Sector. SMEDA provided support and facilitated the group in the entire process.
As a result of SWOG deliberations since its formation in July 2004, the private sector led group has progressed significantly towards strategy development through consensus of the stakeholders and achieved many mile stones towards implementation of the same.

An outline of the development strategy and a brief account of strategy development process along with the salient milestones achieved are resented in the following lines.
Study of existing reports; including a Sector Development Study Report compiled by SMEDA.

Benchmarking:
Strategy Working Group selected New Zealand and Australia as Best Models and India as a Comparable Model for benchmarking of Dairy Sectors in these countries for dairy sector in Pakistan. An international Dairy Expert from New Zealand Visited Pakistan in December 2004 as the first step. Initial comparisons were made and initiatives were rationalized. Australia was added as a benchmark country to capture new initiatives identified by the expert.
A delegation comprising members of the Strategy Working Group visited New Zealand and Australia in February 2005 to study the dairy sector in these countries. The purpose of the visit was to benchmark dairy sector and learns how to improve dairy sector in Pakistan based on experiences of these two benchmarked countries. Study tour to India is also planned to study a comparable model and also to seek technical assistance from AMUL (India) related to policy reforms in Pakistan. The Final Policy Proposal would be formulated after study tour of India.

Consensus, Approval and Implementation:
SWOG and SMEDA initiated a series of interactions with key stakeholders across the dairy value chain and support institutions including Universities and Educational Institutions, Support Agencies of the Government of Pakistan like PCSIR, NSRP. PRSPs, etc to understand the needs and demands of the stakeholders, identify gaps and missing/week links and identify possible solutions to the problems facing the sector. A strategy formulated as a result was presented to the Prime Minister of Pakistan The Prime Minister of Pakistan has approved the strategy and proposed initiatives including establishment of a fully functional company for the better management of the sector. Pakistan Dairy Development Company “Dairy Pakistan” is in the process of registration as an independent not-for-profit company to further refine sector strategy and design, implement initiatives identified for the development of the sector.

Progress on Key Strategic Initiatives
The key strategic initiatives meant to achieve the overall strategy objectives are outlined as under.

Milk Collection & Chilling Projects
Feasibility for the joint Milk Collection Initiative by Millac, Niralla, and Dairy Crest has been finalized. Local staff has been hired and MOU between 3 parties is being signed.

NRSP Joint Milk Collection Pilot Project
Process for engaging a Research Agency to prepare project feasibility for an NRSP supported initiative for milk collection at Rahim Yar Khan is underway.

Joint Milk Collection Pilot Project in Sindh
Engro Foods a leading business house has initiated a project  for a Joint Milk Collection Project in Dharki Sindh with collaboration from SRSP.

Milk Chilling & Collection Pilot in collaboration with P&D Punjab
Proposal to fund milk chilling & collection equipment to Strategy Working Group is under process by Planning & Development, Government of the Punjab

National Dairy Lab(s)
The Working Group realizing the importance of a National Laboratory for quality testing of milk constituted a working group comprising of Nestle, Millac, UoAF, SMEDA to initiate work for the development of proposal for a National Quality Lab for the sector. PCSIR, Faisalabad University Labs, and Agha Khan Hospital Labs are included in a capacity building program for the above mentioned initiative.

Pilot on Milk Quality Survey
A milk quality survey to gauge the quality of milk available to consumers in Lahore was organized by SMEDA in March 2005 in collaboration with PCSIR, Institute of Food Science & Technology (University of Agriculture Faisalabad), Nestle, and Millac. The survey results were shared with the stakeholders and helped realize the gravity of situation with respect to quality of milk available to consumers in Lahore.

Training & HR Development
Strategy Working Group sub-committee including SMEDA  worked with UoAF to have Four Years Undergraduate, Masters and PhD studies identified and developed with industry inputs. Internship program between UoAF and Dairy Working Group member companies also has been planned.

Safety Standards
Private sector worked with SMEDA to formulate recommendations on Food Safety Standards and dairy related quality laws. SMEDA contributed by benchmarking milk quality standards of the leading Dairy industries in the world.
Dairy Sector Research
Work was also initiated in April 2005 with Institute of Food Science & Technology University of Agriculture, Faisalabad), PCSIR, Nestle and Millac for further research related to quality of milk. Other planned Research Projects in this area include:

Quality of Milk-Further Research:
Research on the impact of poor quality milk on consumers’ health is planed. Similarly surveys on domestic Market trends and demand to ascertain level of market appreciation of quality milk, and willingness to pay for improved Quality Milk would be assessed and existing/latent market demand for consumer price elasticity would be undertaken. Market Research to ascertain the supply side has also been identified and planned including Applied Productivity Research on Animal Breeding/AI, Fodder/Improved Quality water, Health/Veterinary Services, Husbandry practices, Hygiene Issues would be taken up.

Policy Reforms
SMEDA is acting as a facilitator and support platform by developing a Policy Reform Package for the Dairy Sector. A white paper on policy and regulatory reforms would be finalized after study tours to India in December 2005.