Local dairy farmers and milk powder importers are at loggerheads over the proposed duty hike on milk powder from the existing 5% to 10% in the budget for the fiscal year 2019-20.
Despite the proposed hike, local dairy farmers at different post-budget programs criticized the government for not increasing enough customs duty on the imported milk powder, as their association in the budget proposals had demanded increasing the duty to 50% to protect local dairy industry.
Bangladesh Dairy Farmers Association (BDFA) leaders have protested against the minimal budgetary duty hike by dumping milk in the streets of the capital.
On the other hand, foreign milk brands urge the government no to increase any import duty in the budget, saying the high duty regime will dent the investment climate, and hurt competitiveness of local dairy farmers.
“This is the first time we placed demand on increasing customs duty on milk powder, as we can no longer bear the losses,” says Shah Emran, general secretary of the association, claiming that the local milk producing industry has been in grave problems due mainly to low-priced imported milk powder in the country.
“Sometimes, we cannot sell our milk, which results in frequent wastage of good quantity of milk,” he says.
“The crisis in the dairy sector has intensified as big local firms like Brac, Pran, and Akij, who has been procuring substantial amount of unprocessed milk from the farmers, started to produce their dairy products with the imported milk-powder in recent times,” Emran claims.
He says the local companies can get one litre of milk at between Tk22 and Tk27 produced from imported milk powder, while they cost Tk32 to Tk37 for a litre of milk from local dairy firms.
On the other hand, importers have demanded keeping the previous 5% customs duty unchanged for milk powder, saying increasing the duty is not a solution for the local dairy industry.
The country has been importing a substantial amount of milk and dairy products from Denmark-based multinational company Arla Foods Amba since 1960.
“Increasing duties will not help the local dairy sector,” Mark Boot, vice president (Southeast Asia) of Arla Foods Amba, has told Dhaka Tribune.
“I believe that creating a favourable investment climate in the country is the answer,” he adds.
Boot says Bangladesh has more demand for milk than the current supply and there is a need to develop both the local and imported dairy supply chains for ensuring affordability for nutritional foods.
Apart from bulk milk powder, the country imports filled milk at a rate of 25% customs duty and 3% regulatory duty.
“The 25% import duty on filled milk should be reduced to 0-5% to cater to the nutritional demand of the country’s huge population,” Boot mentions.
“Our intention is to keep the milk price affordable to the lower income group of Bangladesh,” he says, adding that the high import duty will make difficult for them to ensure the low price.
Because of the proposed budget, milk will become more expensive for all consumers of Bangladesh, he believes.
In a recent market visit, the prices of per kilogram of milk powder have increased by Tk20-70 from what they were a month ago. Traders say the price hike took place because of duty hike proposal in the budget.
According to the BDFA, the country has a yearly demand of 15,000,000 litre of liquid milk. Of the total, local farmers can produce only 9,400,000 litres of milk, or 62.67% of the total demand.
Data from the leading organization of dairy farmers says that now there are 1,200,000 dairy farms in the country and 9,400,000 people are directly or indirectly involved with the industry. The estimated investment in the local dairy sector is around Tk90,000 crore, according to BDFA.
Arla suggests that the government should encourage the foreign investment so that the farmers can gain knowledge about advanced technology.
