DA wants tariff on imported liquid milk increased from 3% to 10%

The Department of Agriculture (DA) is pushing for an increase in the tariff on imported liquid milk from three to 10 percent to protect the fledgling local milk industry from the influx of cheap imported milk.

At the same time, the DA is supporting the local milk producer’s request to be exempted from the value added tax (VAT) to keep local milk prices competitive, especially now that demand is shifting from powdered milk to liquid milk.

Salvacion M. Bulatao, administrator of the National Dairy Authority (NDA), said in a press conference that among developing countries, the Philippines’ dairy industry has one of the lowest protection levels.

"The Philippines has a three-percent tariff while Thailand has 30 to 40 percent, and India has 60 percent. What we are proposing is just to raise this 10 percent," Salvacion said, adding that this can still be raised further to 18 percent which is the maximum allowable tariff under the current World Trade Organization (WTO) structure…

Juan C. Katigbak, president of the Batangas Agribusiness Center Inc. (BAC), said the 10-percent rate should be adequate to make local production economically feasible while shielding the domestic milk industry from foreign competition.

Katigbak said that at the proposed 10-percent tariff, ultra high temperature-treated (UHT) imported milk prices will increase by a minimal two percent which is still affordable to AB consumers.

Local milk producers are also pressing for an exemption from VAT.

Bulatao said that currently, the Philippine dairy industry is the only dairy industry in the world that is being made to pay VAT.

She said the government should waive the VAT on locally-produced milk to develop the dairy industry. Currently, the country produces just 23 percent of liquid milk requirements. Last year, fresh milk imports amounted to more than 40 million liters, which is twice the level in 1999.

This holds a lot of potential as the Philippines imports P25-billion worth of milk products yearly and that the entire dairy industry grosses P54 billion yearly.

"We are seeking maximum support from the market. While consumers before settled on powdered milk, there is now a shift in consumer demand to fresh milk. Our dairy farmers and milk producers should be able to have the advantage to seize this growing consumer preference. Given the proper support, they can deliver and meet the growing demand," Bulatao said.

Currently, there are at least four local milk producers supplying fresh milk in the market. These are the Batangas Agribusiness Center Inc. that buys milk directly from cooperatives and supplies these to Starbucks; Hacienda Macalauan and Daily Dairy Corp. that supplies Seattles Best and other institutional outlets; DVF Inc. and Rizal Dairy.

With anticipated growth in demand, Bulatao said NDA is targeting liquid milk production of 20,000 liters per day, a 48-percent increase from average daily production of 13,500 liters in 2002.