The corporate attack on Pakistan’s small dairies

A small dairy farmer cattle herd. Photo: Punjab Lok Sujag

Small dairy farms across the world have been cornered into an existential crisis. Through greater control of markets and policymaking and deceptive marketing, big dairy businesses are ramping up their consolidation of this sector. Smallholder dairy farms have little choice but to either take on debt and grow or die out. This corporate takeover began in the global north, but dairy corporations are now bulldozing through developing countries, spreading panic and misfortune among small farms.

In Pakistan, the stakes are particularly high. Eighty per cent of its dairy production and distribution is still in the hands of small backyard farms and small-scale vendors. But the public's trust in and reliance on the milk of small-scale dairies is under constant attack by corporations and their backers in government who claim it is unsafe. A new law will ban the sale of fresh milk from small-scale dairies and give corporations total control over the milk supply, putting in grave jeopardy the livelihoods of millions of farmers and the access to nutritious dairy of millions of poor consumers.

Pakistan: land of small dairy farms

Livestock rearing and dairy is the backbone of Pakistan’s rural economy. Ninety-eight per cent of Pakistan's large peasant population is engaged in rearing livestock. For them, it is a way of life. Their animals are like a bank account, which they can sell in case of emergencies or family needs.

More than 8 million rural families are engaged in dairy production, which means around 35 to 40 million people are dependent on this sector. Dairy farming sustains their own food and nutritional needs, and the sale of surplus milk provides a key source of income. The milk produced by their cows and buffaloes accounts for over a third of the average farming family's revenues. Besides that, the milk sold by small farmers provides a source of income for thousands of small-scale vendors (known as gwalas or dodhis). They buy milk from dairy farmers and sell it directly to consumers in the city or small-scale processors who turn the milk into cheese, yoghurt and other dairy products daily.

These smallholder dairies, composed of small farmers with a few cattle or buffalo and small-scale vendors and processors, account for more than 80% of the national milk supply. The big dairy corporations like Nestle, Friesland Campina, Engro and Cargill account for a mere 5 per cent, with the remaining 15 per cent supplied by national commercial dairy companies like Nishat, Dairyland, Friendship, Sharif, Sapphire and Dada Dairies. In the eyes of the transnational dairy companies, Pakistan, the world's fifth-largest milk producer, is thus a huge potential market if they can manage to take it out of the hands of the small-scale dairies.

A smallholder dairy in Pakistan. Photo: Punjab Lok Sujag

Corporations typically rely on two tactics to steal markets from small-scale dairies. One is to import cheap powdered milk from the big surplus producing countries in North America, Europe and Oceania. The other is to push for laws and regulations that criminalise small-scale dairies. Big dairy companies use these two tactics to take over dairy markets across Asia and the world (see Box: Vietnam’s shift to mega dairies ).[1]

Corporations have had mixed success with the first tactic in Pakistan. When imports of powdered milk climbed to a record high of 44.2 million kilograms in 2015, coming almost entirely from Europe, public pressure forced the government to enact a 25% duty on powdered milk imports. This was increased to 45% in 2017 and then 60% in 2018, despite vociferous EU ambassadors and the big dairy lobby. Yet, even at this level, the big dairy companies continue to bring in imports and undercut local farmers.[2] During the Covid19 crisis, farmers called on the government to ban imports of powdered milk as they were getting hammered by a drop in demand and ongoing excessive imports. In this political context, the dairy corporations have had to rely heavily on the second tactic to overtake Pakistan’s small dairies.

Vietnam's shift to mega-dairies

In the past, the Vietnamese government favoured rural family dairy farms, provided public support to them and recognised family farming as the principal agriculture production model. Things shifted between 2008 and 2018 when several policy changes were carried out to promote mega-dairy farms. Stringent food safety standards were introduced, which facilitated a corporate dairy regime at the cost of smallholder dairy farms.

When European Union milk quotas were removed in April 2015, there was a worldwide drop in milk prices. Commercial dairies in Vietnam were affected and they stopped buying milk from smallholders. In Củ Chi alone, nearly 800 farmers suddenly lost access to sales outlets for their fresh milk. Several small dairies were forced to stop dairy production and reorient their farm activities.

Post-2015, corporate dairies went on the offensive against smallholders' dairy farms. With the emergence of mega-dairy farms in Vietnam, consumer and government confidence for smallholder dairies steadily declined.

In 2017, the government enacted dairy farm regulations that made quality control procedures mandatory. Smallholder dairies had a lot of difficulty adapting to those new standards. Mega-dairies took advantage of this since procuring milk from big farms reduced their procurement cost. The Friesland Company in Ha Nam province, for example, initially started procuring from small dairy farmers but later decided to set up 50 professional dairy farms.[3]

Food safety laws: smallholder milk production on a noose

For years now, the big dairy companies have waged a relentless campaign in Pakistani media to vilify milk from small dairies. It's accused of being unhygienic, unhealthy, adulterated and of poor quality. Constant telecasts of TV advertisements show awful images to attract consumers' attention to the dangers of fresh milk, otherwise known as "loose milk".[4] But despite their attempt to cast the gwalas as cruel villains, most Pakistanis still prefer the untreated milk they supply, which is readily available everywhere and is less expensive than packaged milk.

Local vendor in Pakistan selling fresh milk. Photo: Qaumi Akhbar

There is no denying that adulteration can happen within small dairies. A milk delivery person might add water to fresh milk to increase its volume. During the hottest summer days, a delivery person sometimes will add ice to keep it cool and prevent spoiling during the trip to long-distance consumers. It is not something new, and it has been happening for centuries. Nor is it only a thing of small dairies since the big dairy companies have their own adulteration and contamination scandals (See box Packaged milk: Hazardous for human consumption?). But lately, Pakistani officials have been making a big fuss over it.

Packaged milk: Hazardous for human consumption?

The vast campaign underway in Pakistan against loose milk is tongue-tied on the dangers of Tetra-packaged milk. Adulteration in UHT (ultra heat-treated) and pasteurised milk in Pakistan was a genuine health hazard a few years ago. On 16 September 2016, the Supreme Court of Pakistan ordered the chemical examination of all domestic and international packaged milk brands available in the market. The SC asked the University of Agriculture Faisalabad, Lahore University of Veterinary and Animal Sciences and the Pakistan Council of Scientific and Industrial Research (PCSIR) to conduct the tests. The PCSIR report confirmed that the packaged milk of almost all big brands contained detergent and dangerous chemicals and were very dangerous for human consumption.

Adulteration in packaged milk was again brought up in the Supreme Court of Pakistan in early 2018 when the court banned packaged milk sold under four major brands and ordered the authorities in the Sindh Province to remove the milk from sale racks.

A similar case of packaged milk adulteration also came up in the Lahore bench of the Supreme Court on 6 January 2018, and the court branded packaged milk "unfit for consumption" because it contained the highly hazardous chemical formalin, which is dangerous for human health. The increasing cases of adulteration in packaged milk across Pakistan prove that quality control of the commercial dairy industries is pretty lax and often overlooked.[5]

Between 2007 and 2011, the government of the Province of the Punjab, home to all the big dairy companies and 73% of the country's milk supply, enacted a Pure Food Law and a Food Safety Standards Act, which, for the first time, introduced rigorous punishments for milk adulteration. This was followed in 2016 and 2018 by regulations banning fresh milk and requiring all pasteurised milk to be sold in packaged form, labelled, and kept at a specific temperature all the way to the consumer.

The new regulations of 2018 require every farmer or cooperative involved in milk production and sale (to middlemen or to a company) to be officially registered. The origin of the milk -before and after pasteurisation- must also be indicated by milk providers. This and several other provisions, such as sanitary standards for the animals and the maintenance of equipment pieces, apply to both smallholders and commercial dairies, irrespective of farm size and livestock numbers. These are simply impossible for smallholders to comply with.

The regulations have brought about the repression and harassment of smallholder dairies by authorities. There are cases where local officials have tried to evict dairy farmers with their cattle from the city limits. In September 2019, inspectors from the Faisalabad Municipal Commission raided around 500 dairy farmers in the peri-urban locality of Faisalabad, forcing them to move somewhere else. These producers owned 5-10 buffaloes each and survived on the sale of fresh milk to the city's population. The inspectors wanted to shut down the operation because they ran their smallholder dairies within the municipal jurisdiction. Only after the Lahore High Court intervened were the farmers allowed to temporarily stay in the municipality. The 500 dairy farming families located in the city limits of Faisalabad produce around 40 000 litres of milk every day. Most of the fresh dairy is consumed in the city, cutting the profit margins of corporate dairies.[6]

A not-so-bright future for Turkey’s smallholder dairy farmers

In 1995, Turkey made the pasteurisation of milk mandatory and in 2008, banned the sale of loose milk. To support the enforcement of these laws, Turkey liberalised investments in public sector milk production and provided concessions to private/corporate sector milk producers, which resulted in a 90% increase in Turkey's milk and milk by-product exports.[7] Like Pakistan, Turkey also had a considerable number of dairy farms, which essentially were small family enterprises, micro-scale, having less than 20 herds. This started to change in 2011 when the move towards larger dairy farms began.[8]

Turkey succeeded in carving out a vast export market for its dairy products but at the cost of a large number of smallholder dairies. Most of these small dairies left the business, unable to sustain the increasing investment requirement (to buy imported pregnant heifers, milking machines, imported feed, slurry handling system, cooling tank etc.).

People fight back

The Pakistan Kissan Mazdoor Tahreek (PKMT), an alliance of small and landless farmers, has attacked the policies for undermining nutrition and employment for women and children.[9] The PKMT says the new policies will enable corporations to take over a dairy sector that has enabled a large number of women to feed their families and earn an income. If smallholders exit the dairy business, besides losing a sustainable source of income, millions of families will miss a rich source of food and nutrition.[10]

In May 2019, the Punjab Food Authority ban on the sale of fresh milk in the city of Lahore was challenged in the city's High Court by a group of petitioners. They argued that as a regulator, the Food Authority is only supposed to regulate the sale of milk, not make the sale of fresh milk illegal. They also contended that the ban violated the fundamental rights of sellers and the rights of fresh milk consumers. The petitioners also requested the court to restrain Food Authority bodies from taking action against the sale of fresh milk in the Punjab province.

Buffalo herd. Photo: Village info, Pakistan

But Big Dairy will not give in without a fight. The World Bank estimates there's a USD10 billion market for them if they can get fresh milk consumers to buy their processed milk.[11] Which is why they are lavishly spending on advertising. In just the first nine months of 2017, Nestle and FrieslandCampina spent around USD104.5 million on dairy advertising in the country.[12] And, where publicity does not work, they lobby politicians to force consumers to make the switch. In February 2017, after FrieslandCampina acquired a majority stake in the Pakistani dairy company Engro, the global CEO of FrieslandCampina, Roelof Joosten, and the Chairman of Engro Corporation, Hussain Dawood, met with Pakistan Prime Minister to lobby for the regulation of the fresh milk sector. Shortly after, FrieslandCampina's managing director in Pakistan was quoted saying that the Pakistani government needed to expedite efforts to implement food safety laws to overcome adulteration. Also in 2017, a delegation of the Pakistan Dairy Association, the lobby group for the big dairy companies, met with the Prime Minister demanding a pasteurisation law.[13]

This potential market is not only drawing in the top global dairy corporations, though. One of Turkey's largest dairy producers, SUTAS, formed a joint venture with Pakistan's Nishat Group in 2019 to produce, market, distribute and sell premium dairy products in Pakistan.[14] That year, Cargill also announced a major USD200 million investment in Pakistan over the next three to five years in dairy and other segments of the livestock sector.[15] Saudi Arabi's Al-Tamimi Group of Companies says it plans to invest in Pakistan’s dairy sectors, as have companies from China and Australia.[16]

Despite all these corporate actions, the big dairy companies are still struggling to compete with smallholder dairies. FrieslandCampina has yet to make a profit after three years of significant investments in the country. And, while the taxes they pay are often used as justification for laws that criminalise smallholder dairies, they are now complaining that high taxes on their processed products are to blame for consumers preferring the full cream milk of smallholder dairies instead of their "safe" tea whiteners![17]

The manifold threats from the corporate hijack of the dairy sector

When corporations take over a country's dairy sector, they don't just take over the markets, they also transform the way dairy farming is done. A brutal shift occurs from small-scale, traditional agroecological practices to foreign industrial practices that require costly inputs and imported breeds.

With the increasing involvement of the private sector and changes to livestock policies, Pakistan's commercial and corporate dairies have been importing live foreign cow breeds, like Australian, Dutch, German and American Holstein Friesian. Presently, the population of imported elite cows in Pakistan is around 58 000 heads. These animals are expensive to buy and maintain. They require high tech management, costly feeds and inputs and a well-trained workforce.

Pakistan Sahiwal Breed.Photo: Punjab Livestock & Dairy Development Board

The speed with which Pakistan is replacing its local breeds of cows with foreign species through crossbreeding or live imports is alarming and could deprive Pakistan of indigenous breeds like Sahiwal, Cholistani, Red Sindhi and many others. With a breeding policy that allows the crossbreeding of local indigenous breeds with Holstein, Friesian, and Jersey breeds, a sizable population of cattle crossbreeds has recently emerged in Pakistan and now represents 13% of the total cattle population.[18]

The government intends to eliminate the local hardy cow breeds that can currently produce 1 100 litres per lactation, and increase per cow milk production to 5 000 litres per lactation using foreign breeds. To achieve that, it plans to import massive quantities of semen from elite foreign cows worth USD 241 million to improve the characteristics of local cow breeds through artificial insemination.[19]

Pakistan's rulers see the sacrifice of native cattle breeds that are tick-resistant, heat-tolerant and best suited to this region, as a fair price to pay for the increased foreign revenues that can come from dairy exports. Some economists claim that Pakistan can earn over USD 30 billion from the export of dairy products. The government is eyeing the dairy markets of Iran, China, Malaysia, Philippines, Sri Lanka, Bangladesh, Indonesia and India. But Pakistan should take a lesson from Sri Lanka, where imported Australian cows have become a burden for farmers because they can’t afford the maintenance, costly feeds and overall environment necessary for the upkeep of these elite cows. (See box Sri Lanka, a cemetery of imported Australian breeds)

Foreign cattle breed at a modern commercial farm. Photo: Pakistan Today

The rapid development of the industrial dairy sector in Pakistan also opens up the question of animal feed. Does the industrial feed (imported or produced locally) given to foreign breeds or crossbreeds contain "blood meal" or animal proteins?[20] It will be unacceptable for most Pakistani Muslims due to their religious sensitivities. There is an increasing trend to feed high-quality feed containing animal proteins to cattle in large commercial or corporate dairies in Pakistan to enhance animal productivity. Blood meal or animal proteins are essential ingredients in the cattle feed supplied by all major industrial feed industries to prepare a high-quality feed. According to a report, with the increase of large commercial dairies and fattening farms, existing feeding practices have been adapted to increase animal productivity, including the addition of animal proteins (animal byproduct meals) in the animal feed to achieve adequate protein levels in the cow's diet.[21] Quite surprisingly, the definitions for “feed” and “feeding of milk animals” given in the Punjab Pure Food Regulation of 2018 does not say anything regarding blood meal or animal proteins. With the increasing corporatisation of the Pakistan dairy industry and the expected investment from corporate feed industries, the food regulators seem to have aptly avoided this clarification to ensure hassle-free production or the import of cattle feed mixed with blood meal.

Sri Lanka, a cemetery of imported Australian breeds

Sri Lanka has around 125 000 registered dairy farms, but there are hardly any indigenous cattle breeds left. Most herds are either hybrids or imported Jersey Heifers from Australia or New Zealand. To reduce its dependence on imported milk powder, costing around USD 300 million per year, Sri Lanka decided to increase its milk production and imported pregnant Heifers from Australia and New Zealand.

Between 2012 and 2018, Australia’s largest live exporter, Wellard, exported around 24 500 heifers to Sri Lanka in multi-million-dollar deals.[22] Wellard was also required to provide Sri Lankan farmers with facilities, training and veterinary support. It turned out to be a long-term gain for Australia since cattle feed would be one of its main exports to Sri Lanka after that. However, in April 2019, Sri Lanka halted the foreign breed import programme due to the high mortality rate of the heifers; the incidence of diseases among animals resulted in poor performance.[23] For some small farmers, it was an awful experience to maintain Australian heifers because the imported feed was too expensive, and it would yield only 10-15 litres of milk, much below the promised yield of 20 litres. Some farmers even committed suicide because they had mortgaged their assets to buy the foreign breeds, and after their failed experience, the banks foreclosed on their properties. To facilitate the export of live cattle, the Australian government's export credit agency, EFIC, provided a credit facility to the Sri Lankan Government to fund the purchase. When imported breeds started dying and the experience failed, the EFIC absolved itself by saying that it provided a credit facility to the Sri Lankan Government and had no connection with the farmers who bought Australian cows.[24]

Small-dairies united will never be defeated

Under the banner of pasteurisation and modernisation of the dairy sector, the Government of Pakistan, the dairy corporations and international agencies like the U.S. Agency for International Development, the Australian Agency for International Development and the International Finance Corporation, are all determined to marginalise smallholder dairies. Commercial and corporate dairies are not leaving any stone unturned to damage the reputation of smallholder dairies, which still enjoy a significant hold of Pakistan's milk market.

Even though the population of smallholder dairy farmers and fresh milk distributors is considerable, the different actors of the network are not well organised. The Pakistan Dairy Association, on the other hand, is an organised body of dairy companies that are jointly pursuing pasteurisation and a ban on fresh milk. To challenge the big dairy corporations, the unorganised smallholder dairies need to organise. They need to vehemently defend their informal system and their dairy products, including fresh milk. Though they follow traditional practices of making dairy products with minimal technology, they effectively cater to the nutritional needs of a vast majority of Pakistan's population. They also provide livelihoods and sustenance to around 40 million people, who are directly or indirectly dependent on smallholder dairy farms.

Authorities in Pakistan, as in many other countries, are using food safety regulations, not as a means to protect consumers but as a means to restructure the dairy sector in favour of corporations. This will not improve the milk supply for ordinary people, and it will seriously erode people's access to nutritious fresh milk-- the milk most favoured by Pakistanis. Rules and standards must help smallholder dairies, not undermine them. There is much that governments can do to help smallholder dairies improve the quality and safety of fresh milk, but it has to be done in ways that are adapted to their realities. If fresh milk is wholly banned, farmers won't be the only losers. All those associated with smallholder farms like shopkeepers, traders, delivery people, and everyone engaged with their dairy will be unemployed. This would be a loss for the country that would only be reaped by the corporate sector.

[1] GRAIN, "The great milk robbery", December 2011: https://grain.org/e/4426

[2]See “EU urges govt to lift duty on import of milk powder”, The Express Tribune, 31 July 2016, Islamabad: https://tribune.com.pk/story/1152842/eu-urges-govt-lift-duty-import-milk-powder; Razi Syed, “Duty on imported milk powder increased up to 60%”, 28 May 2017, Daily Times, Karachi: https://dailytimes.com.pk/9387/duty-on-imported-milk-powder-increased-up-to-60/

[3] Emmanuel Pannier, Christian Culas, Sylvie Cournut, Guillaume Lacombe, Nguyen Mai Huong, "Dairy farming, a clash of production models in Atlas of Livestock Transitions in Vietnam: 1986-2016", January 2020, https://www.researchgate.net/publication/347524187_Dairy_farming_a_clash_of_production_models_in_Atlas_of_Livesock_Transitions_in_Vietnam_1986-2016

[4] Kazim Alam, “Of Loose milk and tight margins”, The Dawn, 16 March 2020, https://www.dawn.com/news/1541158

[5] Onusha Ahmad, “Tetra Pack Milk Controversy in Pakistan Sparks a Debate on Social Media”, 30 December 2016, https://www.brandsynario.com/tetra-pack-milk-controversy-pakistan-sparks-debate-social-media/

[6] Abdullah Niazi, “Waging war against the gawala”, Pakistan Today, 9 September 2019, https://profit.pakistantoday.com.pk/2019/09/09/waging-war-against-the-gawala/

[7] Rizwan Asif, “70% of Loose Milk in Punjab Poisonous for consumption”, The Tribune, Pakistan, 5 April 2019, https://rootsforequity.noblogs.org/files/2020/06/Agriculture-2019.pdf

[8] Ozgur Bor, “Economics of Dairy farming in Turkey”, International Journal of Fod and Agricultural Economics, January 2014,

https://www.researchgate.net/publication/317717830_ECONOMICS_OF_DAIRY_FARMING_IN_TURKEY

[9] Pakistan Kissan Mazdoor Tehreek (PKMT) is a mass-based alliance of small and landless farmers, including women farmers.

[10] Press Release, “Women’s Resistances for Rights”, Pakistan Kissan Mazdoor Tahreek, 8 March 2020, https://pkmt.noblogs.org/post/2020/03/09/march-8thinternational-womens-day-womens-resistances-for-rights-press-release/#more-825

[11] International Financial Commission (IFC), “A Fresh Start for Pakistan’s Dairy Industry”, February 2018, https://www.ifc.org/wps/wcm/connect/news_ext_content/ifc_external_corporate_site/news+and+events/news/impact-stories/ifc-financing-package-to-frieslandcampina

[12] Farooq Baloch, “Losing to loose milk”, Pakistan Today, 31 December 2017, https://profit.pakistantoday.com.pk/2017/12/31/losing-to-loose-milk/

[13] News Desk, “Pakistan Dairy Associations Recommendations to the PM to Uplift the Industry”, 7 December 2017, https://mettisglobal.news/pakistan-dairy-associations-recommendations-to-the-pm-to-uplift-the-industry/

[14] Zahid Baig, “Nishat Dairy, Turkish SUTA to produce, sell products in Pakistan”, Business Recorder, 6 April 2019, https://epaper.brecorder.com/2019/04/06/5-page/775344-news.html

[15] “Cargill to grow Pakistan business with US$200 million investment”, Cargill, 17 January 2019, https://www.cargill.com/2019/cargill-to-grow-pakistan-business-with-us200-million-investment

[16] Jehangir Nasir, “Saudia Arabia’s Al-Tamimi Group is Keen to Invest in Pakistan”, ProPakistani, 26 December 2019, https://propakistani.pk/2019/12/26/saudia-arabias-al-tamimi-group-is-keen-to-invest-in-pakistan/; China Economic Net, “Buffalo milk export to boost Pakistan’s forex reserves”, The Express Tribune, 25 April 2021, https://tribune.com.pk/story/2296676/buffalo-milk-export-to-boost-pakistans-forex-reserves

[17] "An interview with Ali Ahmed Khan, chairman Pakistan Dairy Association (PDA)", Business Recorder, June 2021: https://www.brecorder.com/news/40100931

[18] Muhammad Naeem Tahir, Roshan Riaz, Muhammad Bilal and Hafiz Muhammad Nouman, “Current Standing and Future Challenges of Dairying in Pakistan: A Status Update”, Intechopen, 28 May 2019, https://www.intechopen.com/chapters/65652

[19] Munawar Hasan, “Government to introduce fundamental change in dairy sector”, The News, 5 May 2021, https://www.thenews.com.pk/print/830524-government-to-introduce-fundamental-change-in-dairy-sector

[20] Blood meal, a protein-rich dietary supplement made from blood and other leftover parts of slaughtered animals, is both a cheap and effective source of nourishment that compensates for the amino acid requirements for cattle in industrial dairy farms.

[21] I.B. Marghazani, M.A. Jabbar, T.N. Pasha and M. Abdullah, “Ruminal Degradability Characteristics in Animal Protein Source of Pakistan”, The Journal of Animal & Plant Sciences, 23(5): 2013, Page: 1264-1267, http://www.thejaps.org.pk/docs/v-23-5/08.pdf

[22] Jane Dalton, “Western corporations funding huge expansion of eco-damaging dairy factory farms in Sri Lanka, study finds”, Independent, 26 January 2019, https://www.independent.co.uk/climate-change/news/sri-lanka-dairy-industry-cows-farm-us-nestle-australia-new-zealand-animal-welfare-a8748186.html?r=74804

[23] V.K. Vidanarachchi, H.M.M. Chathurika, Hasitha M. Dias, P.M. Korale Gedara, G.L.L.P. Silva, E.R.K. Perera and A.N.F. Perera, “Dairy Industry in Sri Lanka: Current Status and Way Forward for a Sustainable Industry”, University of Peradeniya, Sri Lanka, November 2019, https://www.researchgate.net/publication/344766340_Dairy_Industry_in_Sri_Lanka_Current_Status_and_Way_Forward_for_a_Sustainable_Industry

[24] Lorna Knowles and Siobham Heanue, “Australian cattle exported to Sri Lanka dying and malnourished, local farmers left suicidal”, ABC News, 3 April 2019, https://www.abc.net.au/news/2019-04-04/australian-dairy-cattle-sent-to-sri-lanka-dying-malnourished/10936258