Increased excise duty on juices: Fruit farmers in Punjab, KP, G-B adversely impacted

ISLAMABAD: Fruit farmers in Punjab, Khyber Pakhtunkhwa, Gilgit Baltistan have been severely impacted following a drastic decrease of 50 percent in demand of fruit-pulp procurement by the pulping companies/juice manufacturers.

The industry data available with Business Recorder revealed that the imposition of 10 percent federal excise duty (FED) in the supplementary budget in February 2023 has a direct impact on the farmers engaged in the production of seasonal fruits.

According to statistics, the industry procured an estimated 100,000 tons of mangoes, along with other fruits, from local farmers specifically for the purpose of converting them into pulp in 2022.

Anticipated post-FED implementation in 2023 included a drastic reduction in fruit pulp purchase, which has been decreased from around 61,000 tons to 31,500 tons. This significant projected decline in volume by 50% is adversely affecting the rural economy and hindering its formalization, forcing farmers to bear wastage.

Meanwhile, the formal packaged juice industry has experienced a substantial 45% plunge in March and April 2023 volumes as a direct result of the implementation of a 10% FED on juices in February 2023 through the Supplementary Budget.

This significant impact has led to a shrinking business size, which in turn has unfavourable consequences on sales tax revenue. The formal packaged juice industry, that was contributing approximately Rs16 billion in tax revenues prior to March 2023, is adversely affected by these circumstances. Moreover, the shrinking business size within the industry will lead to increased unemployment.

Following the imposition of the FED, the industry is unable to utilize its installed production capacity to its full potential. Consequently, no new investments have been made or are planned for the upcoming period of 2023-2024. It must be noted that the formal packaged juice industry, which contributes approximately Rs 16 billion in tax revenues is adversely affected by these circumstances.

Jabbar Tatypur, a local mango farmer in Multan, managing mango production in Rajanpur, Jhang and Khanewal on over 1700 acres of farmland says, “Due to decline in pulp purchase by pulping companies and juice manufacturers, we are now constrained to sell surplus in open market, where there is constant fluctuation of rates.”

Like Jabbar, there are countless farmers growing other fruits such as apples in Gilgit, who are facing similar issues. Muhammad Esa, who has a small farmland in Rakaposhi and mostly produces apples and cherries, echoed similar views.

“We had made arrangements considering the rising growth of the sector as demand was increasing, but since the year commenced, there has been a massive decline,” he said, adding that this is resulting in wastage as not hundred percent of the produce is sold as table fruit, and a hefty chunk goes into pulping for juice manufacturing.

Due to their perishable nature and inadequate handling, storage, packaging, and transportation practices, fruits often experience a high rate of wastage. “As a result, farmers are compelled to sell their produce at very low prices, particularly during peak seasons,” said an aarti, a commission agent who serves as the middleman in the buying and selling of fruits.

However, the formal packaged juice industry plays a crucial role in mitigating significant food wastage and safeguarding the livelihoods of farmers by procuring fruits in a timely manner. Furthermore, the industry has been actively assisting farmers in adopting best practices, leading to their upliftment and overall development.

The formal packaged juice industry plays a crucial role in offering consumers safe and healthy fruit-based juices and drinks. This industry boasts an annual turnover of approximately Rs 60 billion, with an investment of PKR 40 billion, and provides employment to over 5,000 individuals.

Copyright Business Recorder, 2023