Fruit demand for pulping plunges 50 percent under FED burden

KARACHI: Fruit demand for pulping has declined by 50 percent following the imposition of 10 percent federal excise duty (FED) in the February 2023 supplementary budget, causing immense harm to the lives and livelihoods of farmers. The imposition of the FED had a severe impact on fruit farmers in Punjab, Khyber Pakhtunkhwa, and Gilgit-Baltistan.

Muhammad Jabbar, a local mango farmer in Multan, who manages mango production in Rajanpur, Jhang, and Khanewal said, “Due to the decline in pulp purchases by pulping companies and juice manufacturers, we are now forced to sell the surplus in the open market where rates fluctuate constantly.”

Similar issues are being faced by numerous farmers growing other fruits like apples in Gilgit. Esa, who owns a small farmland in Rakaposhi and mainly produces apples and cherries, said, “We had made plans based on the growing demand in the sector, but since the beginning of this year, there has been a massive decline,” he said. This situation leads to wastage as not all of the produce is sold as table fruit, and a significant portion is used for pulping to manufacture juice.

Fruits, due to their perishable nature and inadequate handling, storage, packaging, and transportation practices, often experience high wastage rates. “As a result, farmers are compelled to sell their produce at very low prices, especially during peak seasons,” explained an aarti, a commission agent who acts as a middleman in fruit buying and selling.

However, the formal packaged juice industry plays a crucial role in reducing food wastage and safeguarding farmers’ livelihoods by procuring fruits in a timely manner. Additionally, the industry actively assists farmers in adopting best practices, contributing to their uplift and overall development.Sources in the industry said that in 2022, the industry procured an estimated 100,000 tonnes of mangoes, along with other fruits, from local farmers specifically for converting them into pulp. However, with the implementation of the FED in 2023, there is a projected drastic reduction in fruit pulp purchases, dropping from approximately 61,000 tonnes to 31,500 tonnes.

This 50 percent decline is negatively impacting the rural economy and hindering its formalisation, forcing farmers to bear wastage. Meanwhile, the formal packaged juice industry has experienced a substantial 45 percent decrease in volumes during March and April 2023, directly resulting from the implementation of a 10 percent FED on juices in February 2023 through the supplementary budget.

This significant impact has led to a reduction in the size of the industry, which has unfavourable consequences for sales tax revenue. Prior to March 2023, the formal packaged juice industry was contributing approximately Rs16 billion in tax revenues. However, it is now adversely affected by the current circumstances. Moreover, the shrinking industry size would lead to increased unemployment.

As a consequence of the FED, the industry is unable to utilise its full production capacity, resulting in a lack of new investments in the upcoming period of 2023-2024. It is important to note that the formal packaged juice industry, which contributes approximately Rs16 billion in tax revenues, has been adversely affected by these circumstances.With an annual turnover of around Rs60 billion and an investment of Rs40 billion, the packaged juice industry employs over 5,000 individuals. The entire value chain is urging the government to withdraw FED on the packaged juice sector to revive the value chain, which largely involves medium-sized fruit growers. The decision could aid in uplifting the rural economy.