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The promise of nutrition broken in budget 2021-22 as dairy industry taxed

The budget presented to the parliament on 11th June has negative implications for the dairy sector and would suck out around Rs5 billion from the industry by raising the sales tax in the industry to 17 percent from 10 percent. This would impact the poor people who will bear the tax burden.

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Everyone remembers that on his first address to the nation, Pakistan’s Prime Minister Imran Khan put a specific focus on the issue of malnutrition and stunted growth among the children in Pakistan. He mentioned that 45 per cent of Pakistan’s young children in Pakistan face stunted growth due to lack of nutrition, and he vowed to get rid of the issue.

However, the figures from the budget for the upcoming Fiscal Year 2021-22 are going against the promise made by the PM three years ago.

On the face of it, the dairy industry is getting incentives in the form of additional customs duties on the raw materials for vaccines and feed additives to incentivize the dairy sector, however, if we look at the regulatory duty levied on the dairy products, they provide a whole another picture.

Before we go into the details, it is worth mentioning that the dairy industry of Pakistan had asked for support from the government through positive measures like giving zero-rating to the industry. This would imply no value-added tax would be levied on the industry. However, that is not the case.

The budget presented to the parliament on 11th June has negative implications for the dairy sector and would suck out around Rs5 billion from the industry by raising the sales tax in the industry to 17 per cent from 10 per cent.

Read More: Former FBR chairman comments on the new Budget 2021-22

It would impact the prices and thus the demand side would be impacted as the dairy products would become unaffordable for the already marginalized community of Pakistan.

The most impacted sectors due to the application of the VAT of 17 per cent include the cream industry with an impact of Rs700 million; the fortified dairy powders industry would be also be impacted by Rs700 million.

It is worth mentioning that the demand for dry milk is high, as it is covering the space left behind by the poor supply of fresh milk in certain areas. It also serves as a major source of affordable nutrition for school-going children, especially in the rural areas where it is cheaper due to its high shelf life and no need for refrigeration.

Furthermore, the 17 percent VAT would impact the yogurt industry by Rs400 million, the flavored milk market by Rs700 million, and Tea cream market by Rs1500 million.

The adverse impact of the tax is not on the producers but the consumers as the producers will pass the tax burden onto the people and the prices of the products would increase for the already inflation-stricken poor.

The long-term impact of such a policy is on the nutrition of the young people and women, who are already suffering from malnutrition in Pakistan.

Read More: Here is a summary of Pakistan’s budget for fiscal Year 2021-22

Nutritional Impact

According to UNICEF, “Nearly 10 million Pakistani children suffer from stunting.” The UNICEF report on Pakistan’s nutrition says, “Only 38 per cent of children are exclusively breastfed for the first six months of life. As a result, more than half the children under five years of age are deficient in vitamin A, 40 per cent are deficient in both zinc and vitamin D, and nearly 62 per cent are anemic.”

Another basic reason that UNICEF gives is that pregnant women need a diverse diet rich in vitamins and minerals, though this is rarely the case in Pakistan.

The fortified products made especially for infants and their mothers are one of the best solutions for this and Pakistani children, especially those belonging to poor families need to eat right.

The incumbent government along with UNICEF Pakistan is focusing its support on the 1,000-day nutrition “window,” during which children’s nutritional deprivations can be reversed.

Keeping this in View in September 2020, Imran Khan launched Ehsaas Nashonuma program, a Health and Nutrition Conditional cash transfer program to focus on health of children.

Read More: The new development budget 2021-22 explained!!

In this video, the concern of the government can be seen in doing away with the nutritional problems of the marginalized children of Pakistan, however, this concern didn’t seem to translate into action via the 2021-22 budget presented on 2021-22.

Conditional cash transfers are given under the welfare program to the poorest pregnant and lactating women and those with children under two years of age- Rs 1,500 for each male and Rs 2000 for each female child.

The tax on the dairy industry can prove detrimental to the effectiveness of the CCT program launched by the government as the prices of products increase for the people lowering their purchasing power and thus food demand.

In countries like the UK, the law states that Milk and preparations of milk (yogurt, flavored milk, powdered milk, and other edible products made from milk such as coffee and tea whiteners and creamers) are zero-rated, meaning exempt from tax.

Read More: Everyone will be happy after budget: PM Imran Khan tells journalist

Thus, the government must not do away with its own struggle towards ending a problem by creating such policies, that would negatively impact a big goal it has taken up for itself.

 

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