Fruit farmers are facing significant challenges due to regressive taxation policies affecting the juice industry, resulting in a shrinking market for surplus produce and export leftovers, industry officials reported on Friday.
Amid ongoing issues like poor crop management and the wheat crisis, the agricultural sector is now grappling with the imposition of a 20 percent federal excise duty (FED) on fruit juice manufacturers introduced in the latest federal budget. This measure has drastically reduced the demand for surplus produce and export leftovers.
The juice industry, in response, has scaled back on its fruit pulp purchases, leading pulp manufacturers to decrease their fruit procurement due to reduced demand. Traditionally, fruit orchard owners sold their surplus and high yields to pulp manufacturers, who then supplied the juice companies, creating a beneficial value chain for local growers. Each year, over 100,000 tonnes of fruits including guava, mangoes, apples, oranges, and strawberries are purchased.
Over recent years, the local juice beverage industry has been increasingly burdened by taxes. The 2023-2024 budget raised the FED from 5 percent (plus 17 percent sales tax) in 2018-2019 to 20 percent (plus 18 percent sales tax). The total tax impact now stands at 42 percent, as the sales tax is applied after the 20 percent FED.
Fayyaz Chaudhry, a mango farmer owning 20 acres near Multan, shared his concerns. He grows two to three varieties of Chaunsa mangoes, most of which are exported. However, the perishable nature of mangoes and insufficient storage facilities lead to significant wastage. “Most of our produce is exported, but demand fluctuates. During declines, we sell to local pulp producers who then supply juice makers,” he explained. “We appeal to Chief Minister Punjab Maryam Nawaz sahiba to save us from these policies of the federal government,” he added.
Policymakers seemingly overlooked the cumulative impact of increased taxation, a more than 50 percent rise in raw material costs, and inflationary pressures on prices. Rather than boosting overall tax revenue, these measures have reduced the beverage sector’s tax contributions to the national treasury.
Industry officials reported a 41 percent decline in volume following the CED’s imposition, with production halted for over 100 days annually. Prior to the recent FED increase, the fruit juice industry was thriving, with a turnover of approximately Rs60 billion, Rs40 billion in investments, and significant job creation. Consumers benefited from the heightened competition, which diversified the product range to include healthier, sugar-restricted options.
As the upcoming mango harvest season approaches, farmers in Multan lament the likely wastage of surplus mangoes, unable to secure arrangements with pulping units that usually book produce in advance. The current scenario paints a grim picture for the fruit farmers, already reeling under the compounded pressures of economic and policy challenges.
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