Rising costs hit consumers: Milk now more expensive in Pakistan than in France

Milk producers in Pakistan have increased prices by up to 25% following the implementation of new taxation measures, passing the 18% rise in general sales tax (GST) directly to consumers and making dairy more expensive in Pakistan than in some developed nations.

For instance, the price of Olper milk has surged from Rs295 to Rs360 per liter since June, with other brands following suit. An official from a milk-producing company attributed this hike to the new GST and taxes on filers and non-filers, affecting infant formula, fortified milk products, and packaged items.

The new milk prices were increased by more than a fifth in Pakistan after the new tax was imposed in Budget 2024-25 last week. Previously, it was tax-exempt.

The new milk tax has made the dairy staple more expensive than in France, Australia, and some other developed nations, according to Bloomberg.

Ultra-high temperature (UHT) milk in Karachi now costs 370 rupees ($1.33) per liter, compared with $1.23 in Paris, $1.08 in Melbourne, and $1.29 in Amsterdam, according to Bloomberg data.

Meanwhile, the Fast Moving Consumer Goods (FMCG) sector faces significant challenges due to the Finance Bill 2024’s imposition of 2.5% advance income tax (AIT) on non-filer retailers and 4% GST on non-registered retailers. This has made FMCG manufacturers de facto withholding agents, causing confusion and pushing 90% of sales to unregistered retailers who refuse to pay these taxes.

“The burden of tax collection has unfairly shifted to manufacturers,” lamented the official, noting that since July 1, 30-40% of dispatched goods have been returned by unregistered retailers. This disruption threatens the supply chain, forcing manufacturers to consider scaling down production and impacting farmers supplying raw materials.

Pakistanis expressed their anger on social media platforms over the price hike. “Bone-breaking inflation is on its peak! Milk prices in Pakistan have surged by more than 20% following the imposition of a new tax, making the dairy staple more expensive in Karachi than in Paris, Melbourne, and Amsterdam,” said one of the users on X.

The rise in milk costs is expected to worsen inflation in Pakistan, where wages have stagnated and purchasing power is declining.

Flour price hike anticipated

In another sector, the Pakistan Flour Mills Association (PFMA), Sindh Zone, anticipates a price hike of Rs5.5 to Rs9 per kg across various flour varieties due to new tax measures affecting retailers, wholesalers, and distributors. Chairman Chaudhry Aamir Abdullah warned of imminent price increases unless the government revises its stance. He criticized the burden placed on consumers and urged authorities to reconsider these taxes, which disproportionately affect low-income groups.

The increased milk and flour prices are anticipated to aggravate inflation in Pakistan, where the unemployment rate is all-time high, wages are deteriorating and purchasing power is declining.

Last week’s budget also included a record 40% tax increase to meet the International Monetary Fund’s (IMF) conditions for a new bailout.

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