Nestlé accused of exploiting farmers

Company calls claims of paying 'ridiculously low' prices for milk 'bovine excrement', writes James Morrison

Nestlé has been accused of exploiting Pakistani dairy farmers by buying up their milk for less than it costs to produce – and selling it back to local people at inflated prices.

Nestlé has been accused of exploiting Pakistani dairy farmers by buying up their milk for less than it costs to produce – and selling it back to local people at inflated prices.

In a new twist to the row over the company's demands for £3.7m from Ethiopia, The Independent on Sunday can reveal that it is bulk-buying cheap milk from peasants and selling it on as "long life" at a profit of 200 per cent.

Details of Nestlé's activities in the Punjab region of Pakistan are contained in a new, as yet unpublished, report by the charity Punjab Lok Sujag, which works for consumer protection in Pakistan.

In it, the multinational is accused of taking advantage of a "totally unregulated" market to offer "ridiculously low" prices for milk it eventually sells as long-life.

The report, Milk Security in Punjab, highlights Nestlé's use of intermediaries to offer farmers cash up-front for their produce.Nestlé, it says, pays farmers less than the milk's production cost, engendering a cycle of under-investment on farms and growing dependency on producers like itself.

While farmers are paid around 21.5 rupees (23 pence) for two litres of dairy milk, "the industry" charges consumers Rs68 to 92 for the same amount, according to the report. The price of a litre of processed milk, around Rs38, is more than a farmer's average daily wage, and could buy 4kg of wheat – enough to feed a family of seven for two days.

"There is no restriction on the quantity of milk that a company can collect from an area. This is resulting in milk collectors draining areas dry resulting in severe food insecurity which in turn creates malnutrition and poverty," it says.

The report argues that Nestlé is more culpable than other companies because of its activities in the country prior to the introduction of widespread milk production there. Though it is now the world's fifth largest milk producer, until the 1990s Pakistan survived largely on imports from western companies like Nestlé.

The report's author, Tahir Mehdi, who has also written an acclaimed study on breastfeeding funded by Unicef, wants Pakistani ministers to introduce tough controls over the market. "There is so little development in this area that the only hope is the state," he said.

Francois Perroud, corporate spokesman for Nestlé, dismissed the report's findings as "bovine excrement". "We are selling an industrial product. It has been collected at great cost."

Nestlé has been roundly condemned for demanding a £3.7m payment from famine-stricken Ethiopia. It claimed the fee is compensation for the nationalisation of a German business it now owns by the country's 1970s military dictatorship.