PHOTO: FILE
ISLAMABAD: FrieslandCampina, one of the largest dairy companies, has urged Pakistan to review its decision of charging 45% import duty on dairy products, which it said has put some players at a competitive disadvantage.
FrieslandCampina’s global chief executive officer Roelof Joosten took up the issue during his meetings with Prime Minister Nawaz Sharif and his cabinet members, according to officials privy to the development.
FrieslandCampina recently acquired a majority stake in Engro Foods for a little less than $450 million.
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In the budget for 2016-17, the government imposed 17% tax on the inputs of the dairy sector by withdrawing the zero-rating regime. It also slapped an additional 25% regulatory duty on imported powdered milk, increasing overall duty on the product to 45%.
The decision was a blow to the Engro Foods-FrieslandCampina deal which at that time was at its initial stage of negotiation. The sudden change in tax regime disturbed the business equation of the company.
The government withdrew the zero-rating regime facility on inputs of milk, butter and other dairy products to hide the inefficiency of the FBR that was showing the sector’s Rs8 billion annual sales tax refunds as part of its revenues.
It imposed additional regulatory duties that the government said was “to protect the farming community’s interests”.
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Erratic change
The change in tax structure adversely affected the profits of the dairy sector companies. Engro Foods profit remained almost flat at Rs2.6 billion during the first nine months of 2016, according to the company’s balance sheet. A major reason appeared to be a drop in its sales that stood at Rs34.3 billion -down by 7.8% when compared with the same period of the previous year.
Joosten also expressed his concerns about high duties during a dinner hosted by Engro Foods on Wednesday. “The authorities should play a role in establishing a level playing field in import and export of dairy products, for example by ensuring realistic and competitive import charges,” said Joosten while speaking at the occasion.
He said that low duties would enable import of high value-added dairy products.
The industry people said that the government should at least lower the duties on those dairy products that are not produced in Pakistan like infant milk.
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The CEO also urged stakeholders to work for harmonisation of food standards and introduce legislation in this regard. The dairy industry as well as provincial and national governments need to endorse the importance of safe and healthy nutrition by ensuring clear standards and legislation, said Joosten.
He mentioned pasteurisation of milk as one area where there should be legislation.
Pasteurisation is important as it kills harmful bacteria, micro-organisms such as Salmonella, E. coli and Listeria that cause food-borne diseases.
Loose milk is sold in Pakistan without pasterurisation, becoming one of the reasons for diseases among children.
Joosten said that his company invested in Pakistan because Central Asia was very important for its business strategy and Pakistan offered the opportunity to invest in the region. He said that a big change from loose milk to packed milk in Pakistan was going to happen.
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The CEO said that there was a growing need for high quality dairy products in Pakistan. “That is why we are bringing in our technology, capabilities and our experiences to develop these products for Pakistani market by working together with the country’s farmer community.”
The CEO further said that they have a plan to make Pakistan a dairy product exporting country in the coming few years.
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