Once a growing beacon of health and economic opportunity, the Pakistani juice industry now faces an alarming downturn. A sector that was projected to grow sales of more than Rs71 billion in 2022-23 has seen revenues drop dramatically to around Rs42 billion following the imposition of a 20 per cent Federal Excise Duty (FED) in addition to an 18 per cent General Sales Tax (GST) in the 2023-24 federal budget, a policy that remains in effect in 2024-25.
JUICE INDUSTRY
Once a growing beacon of health and economic opportunity, the Pakistani juice industry now faces an alarming downturn. A sector that was projected to grow sales of more than Rs71 billion in 2022-23 has seen revenues drop dramatically to around Rs42 billion following the imposition of a 20 per cent Federal Excise Duty (FED) in addition to an 18 per cent General Sales Tax (GST) in the 2023-24 federal budget, a policy that remains in effect in 2024-25.
While the intent may have been to generate additional revenue, the outcome has been counterproductive -- both in economic and public health terms. Juices also contribute to daily fluid intake and promote hydration, especially critical in Pakistan’s hot climate.
Despite these benefits, the accessibility of packaged juices has declined due to a steep tax burden. Consumers are effectively paying around 42 per cent of the price as taxes on a pack of juice, a direct result of the imposition of 20 per cent FED (in addition to 18 per cent GST), impacting the affordability of the products produced by documented players. The affordability of healthier options has been compromised. This has caused a significant shift in consumer behaviour towards cheaper, often unsafe alternatives from undocumented players, whose products typically lack real fruit content, creating an unnecessary health issue.
As the documented sector contracts, industry-wide consequences are becoming evident. The undocumented sector represents more than 25 per cent of the industry's size. Factory operations are no longer running at full capacity, resulting in a freeze on new investment for the past two years. Sales have plunged by 45 per cent, wiping out growth prospects for one of the country's more promising health-oriented industries.
Pakistan's rural farming community is one of the hardest-hit stakeholders in this crisis. The formal juice industry historically played a crucial role in stabilizing incomes for fruit growers. The decline in sales has led to the industry's inability to utilise its installed production capacity, with no new investments in the last three years.
This shrinking business size has also negatively impacted fruit farmers and pulp processors since the fruit procurement volumes have dropped to below 2017 procurement volumes; only 20,233 tons of mangoes were purchased last year vs 31,000 tons purchased in 2017-18, an approximate 34.73 per cent decline in mango procurement volume.
Pakistan produces millions of tons of fruit annually. However, due to the perishable nature of fruits and lack of infrastructure, a lot of it is lost annually due to spoilage, poor storage, improper handling and inefficient logistics
Pakistan produces millions of tons of fruit annually: citrus, mangoes, guavas, bananas and apples. However, due to the perishable nature of fruits and lack of infrastructure, a lot of it is lost annually due to spoilage, poor storage, improper handling and inefficient logistics. This equates to billions of rupees in lost income for farmers and of course for the country.
The formal juice industry has been instrumental in reducing these losses by purchasing fresh produce during peak harvest seasons, thereby preserving fruit that would otherwise go to waste. The industry has also introduced farmers to modern techniques in harvesting, post-harvest handling and quality assurance -- improving productivity and income stability. The deterioration of this system has reversed much of that progress.
As documented juice manufacturers struggle, the informal sector is thriving. Largely unregulated and tax-free, this segment has grown significantly over the past year. These producers often sell unsafe drinks with artificial flavours and little to no nutritional value. Their unchecked proliferation is a public health concern and undermines government tax collection goals.
According to industry estimates, the government could have collected millions more in taxes if these players operated within the formal economy. Instead, the documented sector is squeezed while the informal sector benefits from regulatory gaps. Food authorities must take urgent action to regulate this grey market, ensuring product safety and fair competition.
To restore the health of the juice industry and public nutrition alike, Pakistan must adopt a progressive and pragmatic taxation framework. Several countries incentivize the consumption of fruit-based products by offering lower or zero excise taxes on beverages with natural fruit content.
Reducing the FED by even five per cent could significantly boost demand, promote industry growth, and increase overall tax revenue through broader compliance. Long-term, abolishing the FED on juices altogether would align with national health objectives. The government should also form a joint task force comprising industry experts, food regulators/ enforcement agencies to crack down on unregistered manufacturers and ensure that food safety standards are upheld across the board.
The formal juice industry represents a unique convergence of public health, agriculture, and economic opportunity. By providing affordable access to nutrition, reducing food wastage, and supporting thousands of rural farmers, it plays a vital role in Pakistan’s social and economic fabric. However, the current tax policies are undermining this role.
The writer is a communications professional.
