Pakistan's milk tax: Why dairy staples now cost more in Karachi than Paris

Imagine paying more for a litre of milk in Karachi than in Paris or Melbourne. This startling reality has hit many Pakistanis hard, as milk prices surge to unprecedented levels.

In Karachi supermarkets, ultra-high temperature (UHT) milk now costs 370 Pakistani rupees(PKR) or $1.33 per litre. This is more than the price in several European cities: $1.23 in Paris, $1.29 in Amsterdam, and $1.08  in Australia’s Melbourne, according to Bloomberg.

The dramatic price hike follows Finance Minister Muhammad Aurangzeb’s recent annual budget proposal, which introduced an 18 per cent tax on packaged milk. This new tax has driven up prices for this staple by about 25 per cent, shocking consumers across the nation.

Before this tax, milk prices in Pakistan were on par with those in developing countries like Vietnam and Nigeria, Muhammad Nasir, spokesman for the local unit of Dutch dairy producer Royal FrieslandCampina NV told Bloomberg.

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This surge in milk prices is just one aspect of the broader inflationary pressures squeezing the wallets of many in the cash-strapped nation.

Essentials becoming a luxury

Pakistan has seen a significant rise in the prices of essential kitchen items, including vegetables, sugar, edible oil, ghee, meat, eggs, and pulses, with inflation reaching two to three times the usual rates, as reported by The Express Tribune last month.

During Ramzan, the price of onions, for example, surged from PKR 150 per kg to as much as PKR 300, with some relief found at PKR 250 per kg from certain retailers. Cabbage prices rose to PKR 150 per kg from PKR 80-100, and green chilies climbed to PKR 320 per kg compared to their previous price of PKR 200.

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Karachi shop owner Abdul Hameed expressed concern over the rising prices of essential commodities in a report by ANI, criticising the government for “neglecting the needs of the common people."

But their worries were exacerbated by the recent annual budget, wherein Pakistan’s government, facing financial strain, raised taxes by a record 40 per cent to meet conditions set by International Monetary Fund (IMF) conditions for a new bailout.

This taxation, however, disproportionately burdens citizens already struggling with rising inflation.

According to an April report by the Asian Development Bank (ADB), Pakistan has the highest cost of living in all of Asia.

Acknowledging the public’s concerns, Finance Minister Aurangzeb stated, “I completely understand the stress that people from different sectors feel about additional taxes; I completely empathise and sympathise, but we need to work for it (IMF bailout)."

Reacting to the surge in milk prices, angry citizens took to social media to react: “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,” one user wrote on X.

While another wrote,” Milk prices in Pakistan surged by more than a fifth after a new tax was applied, making the dairy staple more expensive than in France, Australia and some other developed nations. Great going.”

With approximately 40 per cent of the population living in poverty, the surge in essential prices is also likely to adversely affect public health, particularly among children.

The health impact

The government’s decision to impose an 18% tax on locally produced infant formula milk and baby food has sparked strong criticism from industry representatives and the public.

According to Dawn, critics argue that such high taxes will worsen malnutrition among infants and children. They fear that parents, forced to contend with increased costs, may opt for cheaper and less nutritious feeding alternatives.

Asserting the same Nasir said, “It will deny nutrition from a population that is already suffering from malnutrition.”

Pakistan faces a significant malnutrition crisis, with an ‘under-five mortality rate’ of 137 per 1,000 births, a figure that exceeds international standards. Dawn also highlighted findings from the National Nutrition Survey, revealing that 40 per cent of children in Pakistan are underweight and more than half suffer from stunting.

This tax imposition comes at a critical juncture, exacerbating concerns about child health and nutrition in a country already grappling with profound challenges.

With input from agencies