LACK OF FINANCE HAMPERS DAIRY SECTOR'S PROGRESS

TARIQ AHMED SAEEDI (tariqsaeedi@hotmail.com)
Aug 31 - Sep 06, 2009

In the world where modern ways are in use to make dairy farming efficient and scientific techniques are prevalent to raise milch breeds and their throughputs, Pakistani dairy model is synonymous to primeval dairy farming dominant by hand milking and devoid of integrated supply chain. Finance has been a major issue for the sector and despite growing disbursement of credits to livestock sector the dairy farming has not gotten its due share. The fact was reported in SBP draft guidelines for livestock financing. Inadequate access to financial resources is a prime snag in the proper utilization of dairy sector's potentials. Federal Minister Syed Naveed Qamar said annual milk production in Pakistan was over 40 million tons and the country was fifth largest milk producer in the world. He said only 3.5 percent milk was processed.

Weak backward and forward links limit benefits of dairy farming to small scale. Sometimes, this diluted connection leads to loss of business. In Pakistan, integrated dairy farming is a new concept and one can find few farms bolstered with modern farming. As valuable dairy outputs go waste due to deficient vertical chain and a spacious room for breed management exists in this sector in Pakistan, there are attractions for investors who are looking to expand their purview to different agriculture economies world over.

Entrepreneurs and companies from Middle East and Arab countries are expressing their desire to start corporate farming in rural farmlands in Pakistan. Government allotted tracts of agriculture lands to some foreign agriculturists. Capital-intensive corporate farming or modern agriculture with high productivity is unaffordable a march for the government as well as traditional agrarian community of Pakistan. One cannot take agriculture activity alone, but a long range of auxiliaries e.g. infrastructure is required to produce agriculture outputs. For instance, getting high milk production needs fine stock of milch animals in addition to sufficient volume of waters. Well-built supply chain between cattle farm and market and industries is another indispensable element to lessen output wastage and to set off value addition.

Unfortunately, there is a lack of sturdy vertical and horizontal supply line in dairy farming industry in the country, resulting in colossal losses of outputs and export revenue, and high cost of production. Pakistan can learn from best practices of dairy farming in Middle East and other countries. World's largest integrated farm in Saudi Arabia, which manages over 29,000 cattle heads and has milk production of 100,000 gallon per day, is a good example. Farmhouse, fodders' cultivation, milking parlours, packaging division, and distribution system are established on-site in the farm located near the capital city of Riyadh. Al Safi International that owns the farm intends to construct dairy farms in emerging markets and to transfer knowledge across the border. The company imports herds of prolific breeds from Canada and Europe.

Recently, ministry of livestock and dairy development (MLDD), government of Pakistan, announced 60 percent subsidy on establishment of cattle farm under public-private partnership programme.

Developed economies have restored agriculture subsidies to rescue dairy farming from whirlwinds of economic recession. These economies had been extending helping hands to farmers since decades. United States Department of Agriculture has stridden to save contracting income of dairy exporters. Its Milk Income Loss Contract (MILC) programme gives off payments to farmers who are in strained conditions. The department is expected to allocate one billion dollars under the programme, Economist reports in a latest story. The recoiling global demand reduced the volume of milk and milk products intended for exports, increasing domestic supply beyond consumption in US. The superfluous supply cut the price and made farmers to shed supply burden by culling. Also, European Union planned to restart subsidies programmes for dairy exporters.

When international financial institutions raise questions over the export development funds or other industrial incentives of Pakistan as if to give impression subsidies are something to desecrate fair trade philosophy introduced by the World Trade Organization, people suspect dichotomous world economic order; one for developed economies and another for on-the-dole third world countries. Pakistan's dairy farmers have not been affected with global demand slump, since obviously let alone dairy overall livestock exports from the country have never been significant.

Despite being one of the largest milk producers and having large number of cattle heads, Pakistan has not made the mark in international dairy market. The reasons are many but real bottlenecks are infrequent adaptability to innovative dairy methods, fragile infrastructure, dilapidated and unhygienic conditions of cattle farms, unrealized food and agriculture plans, and misappropriation of financial supports given in shape of aids and loans to the sector.

While misappropriation is entirely a subject of anti-corruption measure and only transparency and proper documentation can eradicate it, proper utilization of loans can be made only by connecting flexibility of credit line with the success of project for which loan is granted in addition to make it immaculate project-specific. Central bank may design legal framework so that a loan for revamping farmhouse should be used for the same. Any kind of incentive like mark-up waiver can be offered upon timely successful completion of the financed project. Personal selling can extend outreach of specialized credit. Besides, ministry of livestock and dairy development and its extension institutions need to establish congenial environment in which dairy farmers can directly interact with foreign companies and research institutions for their capacity building or starting projects in joint venture. To promote entrepreneurship in dairy farming MLDD can begin turnkey projects (on small scale) across Pakistan. By doing this, not only government can lighten panic of new investors that they might feel while starting a project from the scratch and it can assemble all on a designated location.