PEST ANALYSIS

POLITICAL
Dairy Sector in the Policy Context: The planners in Pakistan have always been more

concerned about development of the crop sector than dairying in the agriculture economy of the
country. After in dependence, the livestock population in Pakistan significantly deteriorated due
to good stock was taken away by evacuees, indiscriminate slaughter of animals by incoming
refugees, dry cows and buffaloes brought from rural areas by milk dealers for supply of milk in
urban areas were slaughtered at the end of lactation period, and increased demand for meat due
to growth of population and incomes. Urban areas faced acute shortage of milk and dairy
products. The planners faced a policy dilemma of how to increase draught power and milk
production simultaneously. Efforts were made to improve stock of cattle by breeding of
indigenous animals, but output of improved stocks was inadequate to make a dent on the
dwindling supplies of improved cattle and buffaloes in the country. The First Five Year Plan
(1955-60) recognizes the importance of improving breeding centers, operating more hospitals,
dispensaries and mobile dispensaries to check spread of contagious diseases for animals, in
addition to providing for research on increasing supplies of feeds and fodders, and starting pilot
schemes for artificial insemination for improvement of cattle [Government of Pakistan (1957)].
The First Plan was very specific in removing gujar (a cast of milkmen) colonies from cities like
Lahore to outskirts and in recommending milk supply schemes for Karachi and Lahore on a pilot
basis. Under the scheme government was to buy milk from gawalas (milkmen) residing in gujar
colonies and supply pasteurized milk in sealed bottles through registered milk depots. To reduce
adulteration in milk, the Plan recommended testing of milk for purity. The Plan also suggested
that most of the milk would be produced in villages near the cities where small farmers would
specialize in dairying by keeping half dozen or more cows, produce their own feed and organize
them selves in to cooperatives for assembling, transport and even processing of milk. Soon it
became clear that the First Plan, which articulated the problems at hand quite well proved to be
too ambitious in their implementation as compared to the Plan target. The question of how to
improve milk production capacity remained un-addressed even in the Second Five Year Plan
(1960-65), which experienced major policy shift toward development of the large-scale
manufacturing sector. Hence there was very little planned effort, if any, for the development of

the dairy sector.2In the Third Five Year Plan (1965-70) there was renewed emphasis on
agriculture development with the help of the seed-fertilizer-water technologies (the Green
Revolution technologies) for higher yields in the crop sector.
However, the dairying sector went into oblivion. The milk supply schemes envisaged in
the First Plan for Karachi and Lahore first became operational in Karachi in 1965. With the
support from UNICEF (United Nations Childrens Fund), in later part of sixties, subsidized milk
was made available in Karachi to low-income families and school children. This plant had to be
shut down in 1980 after running in deficit for fifteen consecutive years. Similarly, the Pilot Milk
Supply Project in Lahore also went into production in 1967, but like the project in Karachi this
project also failed to receive the patronage of successive government sand hence was abandoned.
Milk processing industry got a boost as part of the development of the manufacturing sector in
the country somewhere between sixties and seventies, when the private sector established 23
milk pasteurization and sterilization plants around three big cities, e.g., Karachi, Lahore, and
twin cities of Rawalpindi and Islamabad. These plants relied on supplies of skim milk powder
coming under the auspices of the World Food Program, which was recombined and pasteurized
before being sold to consumers. These plants failed mainly due to weak acceptance of the
recombined milk by consumers and its short shelf life. In other words, inadequate supplies of
fresh milk to milk processing industry proved to be the major hurdle in their success. There was
a renewed interest in the milk processing industry in late-seventies and early-eighties when
policy support was provided by the Government in the form of exemptions in income tax, duty
free import of machinery and equipments, and availability of domestic and foreign currency
financing [Government of Pakistan (1990)].
Government has always tried promoting dairy industry within the country. For this
government has given lots of relaxation to milk industry for instance there is no tax or excise
duty on milk products. Government has a complete and comprehensive legal framework for milk
industry to keep things in flow and up to mark within the industry. At the same time government
keeps on revising its policies that could help improving overall industry. But when we say that
there are good policies and regulations to promote industry it also require some attention in terms
of implementation of these regulations and governments have never been able to make industry
follow these regulations and promotional policies due to not so keen interest of governments

officials and also the implementation process has been designed so complicatedly that things
never go smooth when it comes to implement or adopt these policies for industry players. The
reason comes as government couldnt streamline the things for being practically observed by the
industry or government was not able to regulate the policies in a way that could reduce irritation
and long processing times for the companies.
ECONOMICAL: The main economic factor acting for this industry is uneducated

suppliers of raw material, so lots of raw material is affected in terms of its quality and
preservation issues and a big percentage of raw materials go to waste before its being processed.
But at the same time UHT milk doesnt have any kind of taxes on it which makes it a good
economic factor for the industry growth and improvements in its production. As UHT milk is a
bit costly than the ordinary milk or non processed milk so income factor of consumer is always
an important economical factor for the industry players. UHT milk industry carry consumers
from upper middle and upper class and income level for this class has increased over time which
is something in favor for the industry.
SOCIAL:
Socially the most important thing for the industry is that people have realized the importance of
UHT milk because of its safety and better health issues than ordinary milk that could carry lots of bacteria
and germs during its complete delivery to the end user. But at the same time people avoid using UHT
milk due to its cost factor, being costly consumption of UHT milk is far less than other un processed milk,
but with the time and awareness among people they have realized that the cost they are paying does pay
them back good enough in terms of health issues and quality of milk. So with time this issue is decreasing
as people have got to know the value of what they are paying for. Critical social issue going around
among consumer about UHT milk is that its something treated or created artificially, which is required to
be taken care of by industry player through their awareness and information campaigns for their
consumers to make them clear about such thoughts they carry about UHT milk to utilize better potential
from the market.
TECHNOLOGICAL:

First of all because the farmers or Gawala dont have the means of transportation to
deliver the milk up the value chain themselves, and they also dont have the means to maintain
the freshness of the milk (refrigeration) so that the milk retains its actual value. Both issues are
related to the availability of appropriate technologies. Technology is, in this case primarily a

function of capital. In milk and specially UHT milk industry technology is a critical factor in
terms of barriers to entry. Although the market is already saturated, downward pressure on UHT
milk prices could be created through either meeting existing capacity, or the establishment of
new UHT plants. The downward price pressure would then induce new section of socioeconomic cross section to enter the market as consumer of UHT milk. Custom duties on the
import of packaging machinery, which is at the heart of the UHT segment of the industry (either
TetraPack technology, or alternatives), are prohibitively high. The artificial cap on increase on
demand of UHT there fore creates a negative impact on small farmers, who must continue to
supply to the informal sector where they are subject to the Gawala. So because being expensive
as high capital investments are required for establishing UHT milk plants due to heavy capital
cost on machinery this industry is suffering.