Fed Dents Rural Economy as Juice Sales, Fruit Pulp Procurement Drop

Fruit farmers in Punjab, Khyber Pakhtunkhwa, and Gilgit Baltistan are grappling with the severe consequences of a 50 percent decline in fruit-pulp procurement by pulping companies and juice manufacturers.

This significant drop in demand is primarily attributed to the imposition of a 10 percent federal excise duty (FED) in the supplementary budget of February 2023. The repercussions are adversely affecting the rural economy, hindering its formalization, and causing farmers to bear the brunt of wastage.

According to existing industry data, in 2022, an estimated 100,000 tons of mangoes and various other fruits were procured from local farmers to convert them into pulp. However, following the implementation of the FED in 2023, the projected fruit pulp purchase volume has plummeted from around 61,000 tons to 31,500 tons, representing a significant 50% decline.

This downturn is having a detrimental impact on the rural economy and impeding its development while also causing farmers to suffer from wastage.

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

This has led to a contraction in the industry’s size, resulting in unfavourable consequences for sales tax revenue. Prior to March 2023, the formal packaged juice industry contributed approximately Rs16 billion in tax revenues, but these circumstances are adversely affecting its revenue generation.

Moreover, the shrinking business size within the industry will likely contribute to increased unemployment. The FED imposition has prevented the industry from utilizing its full production capacity, discouraging any new investments in the foreseeable future (2023-2024).

It is important to note that the formal packaged juice industry, which typically contributes around Rs16 billion in tax revenues, is facing adverse effects due to these circumstances.

Farmers like Jabbar Tatypur, a local mango farmer in Multan, managing mango production in Rajanpur, Jhang, and Khanewal on over 1700 acres of farmland, are constrained to sell their surplus produce in the open market due to the decline in pulp purchase by pulping companies and juice manufacturers.

This exposes them to constant fluctuation in prices. Similar issues are faced by farmers growing other fruits, such as apples in Gilgit. Muhammad Esa, who owns a small farmland in Rakaposhi and primarily produces apples and cherries, shares the same concerns.

The perishable nature of fruits, coupled with inadequate handling, storage, packaging, and transportation practices, contributes to high rates of wastage. This compels farmers to sell their produce at low prices, particularly during peak seasons, further exacerbating their financial burden. Commission agents who serve as intermediaries in the buying and selling of fruits confirm this situation.

However, it is important to recognize the crucial role played by the formal packaged juice industry in reducing significant food wastage and safeguarding farmers’ livelihoods by procuring fruits in a timely manner. The industry has also been actively assisting farmers in adopting best practices, leading to their upliftment and overall development.

The formal packaged juice industry not only ensures the availability of safe and healthy fruit-based juices and drinks to consumers but also contributes to the economy with an annual turnover of approximately Rs60 billion and an investment of PKR 40 billion. It provides employment opportunities to over 5,000 individuals.

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