The government’s 20% Federal Excise Duty (FED) on beverages, including packaged juices, has not benefited the nation’s health as sales and volumes have declined.
Officially packaged juices have taken a big hit with a 40% drop in volume, thus depriving consumers of healthy options. This led to a sharp decline in sales and hindered the growth of the industry.
Waheed Ahmed, patron general of All Pakistan Fruits and Vegetables Exporters, Importers and Merchants Association (PFVA), said the supply chain of the pulp industry is facing challenges due to taxation and the impact of climate change.
“Unstable supply of raw materials such as fruit is harming the liquor industry, which has declined 40 percent in the past two years due to government tax cuts. This decline has also affected the income of farmers,” said Ahmed, owner of Iftekhar Ahmed & Co., which specializes in in high-value products such as juice and fruit and vegetables.
The fruit-based beverage industry employs more than 100,000 people with a turnover of approximately $100 billion and an investment of $50 billion. Some companies have to lay off employees due to reduced sales, which has a negative impact on fruit growers and farmers due to reduced purchases.
As a result of the FED and the subsequent industry contraction, no new investment was made in 2023-24, and none is planned for 2024-25.
In addition, the growth of the undocumented sector has harmed the formal sector, consumers and government revenue collection efforts.
The government should at least try to support the formal sector by reducing or eliminating the FED. It is also very important to regulate or eliminate the informal sector that operates without standards. This can be achieved through the coordination of food agencies and law enforcement agencies.
Another solution is to create a task force or committee with the government and official juice industry representatives to identify and deal with illegal producers. Last year, the FED indicated that it has made the official juice business unprofitable, which is a concern for economic growth, especially in the rural economy.
It is important to include informal players in the tax net because economic stability cannot be achieved by overburdening taxpayers. Pakistan should follow the example of countries that provide preferential tax treatment to healthier varieties with natural fruit content and regular taxation.
Climate change is another major threat to Pakistan’s agriculture, with extreme weather events damaging crops, causing crop losses and threatening food security. Crops report an increase in extreme weather events such as floods, droughts and heat waves that damage crops, disrupt farming operations and cause crop losses. As agriculture contributes 21% to Pakistan’s GDP, employs 45% of its population and 60% of its exports, climate change poses a major risk.
Waheed Ahmed said there is a risk of food security in Pakistan if the impact of climate change on agriculture is not mitigated. Reports indicate that if these challenges, especially climate change, are not addressed, Pakistan’s agricultural production could decline by 30 to 50%. He said the shortage of onions and tomatoes and the 50% drop in Kinnow’s exports was due to the rise in food prices due to supply chain disruptions and instability.
Modern technologies and measures must be adopted to tackle the threat of climate change. This includes developing climate-resilient agriculture such as drip irrigation, conservation agriculture and agroforestry, which help farmers adapt to climate change and increase productivity. Investments in research and technology are essential, including the development of modified seeds for climate-resilient crops and policy support to encourage climate-efficient agriculture and the introduction of farmer-resilient technologies.
In summary, the government’s fiscal policy and the impact of climate change pose a major threat to Pakistan’s economy, especially the rural economy. Immediate action is needed to solve this problem, develop the formal sector and manage the informal sector to ensure economic stability and food security. The government should focus on reducing or canceling the FED rate so that the official sector can flourish.
It is also important to regulate or eliminate the informal sector that operates without standards. It is important to adopt modern technologies and measures to combat the threat of climate change.
