A. BACKGROUND
Pakistan is an agricultural country where agriculture sector contributes about one fifth in country’s GDP and is believed to be the backbone of the rural economy as it provides employment to 42.3% workforce. Livestock is the largest shareholder in the agriculture with enormous contribution of 58.3% in the agricultural GDP. Over 7.5 million farming families are directly involved in livestock farming whose majority is small holders and landless. It truly reflects that a rural population of nearly 40-45 million is directly dependent on livestock farming for the livelihoods. Milk is by-far the single most product of the livestock sector that alone exceeds the combined value of all major cash crops in the country. At the same time, milk is the essential food item at every household level including rural and urban society and is considered as basic source of nutrition for the kids and teenagers besides being a key source of essential! nutrients for all age groups.
Pakistan is third largest milk producer in the world producing over 50 billion litres of milk annually. Historically, the dairy farming has been dominated by small holders having herd sizes 1-6 and milk has been produced at conventional and subsistence level. As a result of various dairy development initiatives since 2005, tremendous improvement had been witnessed in dairy farming where commercial and corporate sector in dairy farming has emerged. The country has seen phenomenal growth in investment in dairy farming during last one decade. The emerging commercial scale farmers had positively influenced the whole livestock farming sector in terms of transforming practices, sharing modem knowledge and skills and attracting international service providers. The trend of investment into the dairy farming continued until 2013; since then the growth started declining and the non-enabling environment for dairy farming has brought the sector at the verge of devastation. This has put the livelihoods of millions of farmers at risk.
It is worth-mentioning that declining livestock sector is indicative of adverse consequences impacting the socioeconomic balance in the country. It is indeed high time that Government should realize the need of an immediate revival of livestock and dairy sector that will not only boost the rural economy but will also substantially contribute towards healthy and prosperous Pakistan. This policy paper encompasses the major challenges currently hampering the growth of this sector along with key recommendations that can considerably help in revival of the dairy sector.
B. KEY CHALLENGES
The current situation of the dairy sector is heavily linked to non-conducive policies that have gradually shaken the interest of commercial and organized farmers while conventional farmers started panic sales of their animals.

1. Import of Milk Powders and Whey Powders

Import of milk and whey powders in the country at very low percentage of custom duty, has played a vital role in sabotaging the growth of local dairy sector in the recent years. Low prices of milk powders in international market, in absence of high tariff of custom duties in Pakistan, enabled local dairy processors and milk traders to import powder and heavily replace the fresh milk purchase from local farmers with imported powders. Furthermore, the increasing trend of selling tea- whiteners and dairy liquid products instead of milk by the processors also significantly contributed in decreasing demand of locally produced fresh milk. On top of this, influx of powder also triggered its massive consumption in unorganized/ informal loose milk, confectionary and industrial milk consumption segments. This whole situation on one hand damaged dairy farmers while on the other hand it adversely impacted the consumers being supplied with white liquids in the name of milk. According to the United Nations COMTRADE database, import of milk and whey powders in Pakistan during last few years is given below: