Fruit farmers are grappling with the impact of the regressive tax policy on the juice industry, which has led to a decline in the market for excess produce and export waste.
Agriculture, already struggling with poor crop management during the wheat crisis, now faces the added pressure of this regressive tax. The imposition of a 20 percent federal excise duty (FED) on fruit juice producers in the last federal budget has significantly reduced the export market for by-products and waste.
In response, the juice industry reduced its purchases of fruit products, causing fruit producers to reduce fruit purchases due to low demand. Traditionally, the owners of the orchards sell surplus produce and high yields to growers, which are then supplied to juice companies, creating a value chain that benefits local growers. More than 100,000 tons of fruits such as plums, mangoes, apples, oranges and strawberries are bought every year.
The soft drink industry has been hit hard by tax increases in recent years. The 2023-2024 budget increases the FED to 20 percent (18 percent sales tax) from 5 percent (17 percent sales tax) in 2018-2019. Since sales tax is applied after the 20 percent FED, the total tax effect comes to 42 percent.
Faiyaz Chaudhry, who owns 20 hectares of land near Multan and grows two to three varieties of Chaunsa mangoes, most of which are exported, says the waste problem persists due to the perishable nature of mangoes and lack of proper storage. unit. “Most of our products are exported, but demand fluctuates. If there is a downturn, we sell to local pulp producers who supply juice producers,” he said.
“We appeal to Punjab Chief Minister Maryam Nawaz sahib to save us from this federal government policy.”
The policy failed to anticipate the combined effects of increased taxation, an increase of more than 50 percent in the cost of raw materials, and inflationary pressures on prices. Instead of increasing overall tax revenue, this measure has led to a reduction in tax payments from the liquor industry to the national exchequer.
Factory officials reported a 41 percent drop in volume after the introduction of CED, with production halted more than 100 days per year. Before the recent Fed hike, the fruit juice industry was booming, generating approximately $60 billion in revenue, $40 billion in investment and significant job creation. Consumers have benefited from competition that has expanded the range of products to include healthier, lower-sugar options.
Farmers in Multan are lamenting the surplus of mangoes in the upcoming harvest season as they have not been able to arrange the equipment that usually pre-orders the product.
