NEED TO EXPLOIT DAIRY POTENTIAL

SHABBIR H.KAZMI
Aug 31 - Sep 06, 2009

Pakistan is the fourth largest producer of milk and the second largest producer of buffalo milk in the world. However, due to lack of attention and deployment of technology the potential of dairy sector cannot be exploited. In fact the prevailing conditions force the country to spend huge foreign exchange on the import of dairy products. If proper attention is given to this sector not only millions of dollars can be saved but substantial foreign exchange can be earned by exporting these products. There is a huge demand for powdered and packaged milk from neighboring countries that include Iran, Afghanistan, UAE, Central Asian countries and other Asian countries like Malaysia and Philippines.

In Pakistan milk constitutes the largest output of livestock sector. According to certain estimates, the value of milk alone exceeds the combined value of wheat, rice, maize and sugarcane. Milk contribution is the highest followed by meat and poultry products. About 75% of the total raw milk is produced in Punjab, 14% in Sindh, 10% in NWFP and only one percent in Balochistan.

The country currently produces substantial quantity of milk estimated around 45 million tons annually. This should be sufficient to meet the indigenous demand of the local population now touching 190 million. However, due to inefficient collection and distribution facilities and lack of modern refrigerated transportation facilities bulk of the raw milk is consumed in the rural areas. As a result Pakistan imports huge quantity of dried/powered milk powder, which erodes foreign exchange reserves.

Pakistan has per capita milk production of around 250 kg, which is more than twice that of India and about 70 percent that of USA. However, the higher milk production is mainly due to larger number of animals rather than due to higher milk yield. Pakistan has three times the number of cattle when compared with Germany. The disparity could be gauged from the fact that in New Zealand one dairy animal produces as much milk as three dairy animals in Pakistan. An American cow produces as much milk as seven Pakistani cows.

According to the data collected from various sources, about 10 million families raise cattle for milk production in the country. However, due to absence of financing facilities most of the families survive on smaller number of animals. Currently, only about 22% of milk produced in the country is processed. Out of total production about 60% is supplied to urban areas in the raw form in highly unhygienic conditions. The daily consumption of milk in Lahore is 3 million liters and in Karachi 4 million liters.

There are about a dozen milk processing plants (mainly based on UHT process). There is only one Dairy Technology Department to facilitate private and public sector capable of advising on modern milk production and preservation techniques. Sindh Agriculture University Tandojam having expertise in modern technology is hardly known.

The UHT processed milk though expensive has proved to be a success in Pakistan. Pasteurization is much cheaper comparatively as the process is much simple and packing material is much cheaper. Small pasteurization plants can play a vital role in meeting demand of cities and towns. Keeping in view the fact that bulk of the milk is obtained from very small farms it is necessary to optimize production cost, increase productivity and protect the animals from contentious diseases. Huge losses are incurred by the farmers whenever any disease breaks out. Pakistan is confronted with numerous problems such as low credit facilities to the small farmers, low investment by the government in this sector, poor market infrastructure, inadequate and feed resources.

Lately, the dairy giant Nestle has established the world largest milk processing plant in Pakistan. It has also established an elaborate network for the collection of raw milks. Milk processing is done at the most modern and state of the art machine and then packed in quality tetra packs. It is estimated that milk is collected from 14,000 farmers spread over an area 100,000 sq km in Punjab. Haleeb and Olper have also emerged as strong brands of packaged milk. However, a lot more remains o be done to exploit the potential.

Pakistan should also benefit from Indian experience. Until 1991 India's dairy business was highly regulated. High import duties, non tariff barriers, stringent licensing procedures impeded the growth of its dairy industry. The recent growth was achieved through government's direct role as well as rising demand, higher incomes and rapid urbanizations. Moreover, cooperative societies in India have played a major role in the development of the dairy industry.

As a result, India emerged the second largest producer of milk and occupies the top position in buffalo milk production. Its annual milk production increased threefold from 21 million tons in 1968 to 85 million tons in 2001-02. In 2005-06 India's milk production exceeded 100 million tons and the country aims to cross 120 million tons mark over the next couple of years.

In order to exploit the potential the government will have to play the leading role. New and the latest technology has to be bought for the processing of milk and manufacturing of other dairy products. The popularity of packaged milk has encouraged the processors to expand the facilities.

ECONOMIC SLOWDOWN CORRODES BANKS PROFITS

BANK ALFALAH EARNINGS ARE DECLINED BY 39 PERCENT

PAGE REPORT

Bank Alfalah during the first half of 2009 has posted a significant decline of 39% in its net earnings at Rs1.1billion as compared to Rs1.8 billion in the similar period of last year.

Both net interest income (NII) and non interest income remained lower at 1% and 5% respectively. Interestingly, non-interest income was higher than expectations due to above anticipated income from dealing in foreign currency and capital gain income.

The bank's NII, during first half of 2009, stood at Rs 5.3billion (1% lower on YoY), NII dropped by 5% over the same quarter of last year at Rs2.5billion mainly due to squeezing margins. The decline in NII is also evident on sequential quarter basis and 2Q2009 interest based income is 6% lower than 1Q2009. Once again the reason is declining margins.

The bank's non interest income also dropped to Rs2.7billion by 5%. Decline is largely attributable to lower fees, commission and brokerage income. The deviation in estimate is primarily due to higher income from dealing in foreign currencies and above than expected realized gain on sale of securities.

During first half of 2009, total provisions swelled by almost three-fold to Rs1.5billion as against Rs0.50billion in the last year's similar period. The bank provided total provisions of Rs0.90billion during second quarter of 2009 alone - up by 146% and 60% on Y-o-Y and Q-o-Q basis, respectively. Importantly, in the quarter, the bank booked Rs126million provision for diminution in value of investment. This was mere Rs18million in the 1st quarter 2009.