Punjab’s Fruit Farmers Struggle as 20% FED Slumps Juice Industry

Fruit farmers are facing severe challenges due to regressive taxation policies impacting the juice industry, leading to a significant decline in the market for surplus produce and export leftovers, industry officials reported on Friday.

Already battling poor crop management amidst the ongoing wheat crisis, the agricultural sector now grapples with the additional burden of a 20 percent federal excise duty (FED) imposed on fruit juice manufacturers in the latest federal budget. This tax hike has drastically reduced demand for surplus produce and export leftovers.

In response to the FED increase, juice companies have curtailed their fruit pulp purchases, forcing pulp manufacturers to scale back their procurement. Traditionally, fruit orchard owners sold their surplus produce and high yields to pulp manufacturers, creating a value chain that benefited local growers. Annually, over 100,000 tonnes of fruits like guava, mangoes, apples, oranges, and strawberries were bought by pulp producers to supply juice companies.

The local juice beverage industry has been increasingly burdened by taxes in recent years. The 2023-2024 budget raised the FED from 5 percent (plus 17 percent sales tax) in 2018-2019 to 20 percent (plus 18 percent sales tax), resulting in a total tax impact of 42 percent, as the sales tax is applied after the 20 percent FED.

Fayyaz Chaudhry, who owns 20 acres near Multan and grows several varieties of Chaunsa mangoes, expressed his frustration. “Most of our produce is exported, but demand fluctuates. During declines, we sell to local pulp producers who then supply juice makers,” he explained. He highlighted the lack of proper storage units, which leads to wastage of the perishable mangoes. “We appeal to Chief Minister Punjab Maryam Nawaz sahiba to save us from these policies of the federal government,” he pleaded.

Policymakers failed to account for the combined impact of increased taxation, a more than 50 percent rise in raw material costs, and inflationary pressures on prices. Instead of boosting overall tax revenue, these measures have reduced the tax contribution from the beverage sector to the national treasury.

Industry officials reported a 41 percent decline in volume following the imposition of the CED, with production halted for over 100 days a year. Before the recent FED hike, the fruit juice industry was thriving, boasting a turnover of approximately Rs60 billion, investments of Rs40 billion, and significant job creation. Consumers also benefited from increased competition, which expanded the product range to include healthier, sugar-restricted options.

Farmers in Multan are now facing the impending wastage of surplus mangoes in the upcoming harvest season, as they have been unable to secure arrangements with pulping units that typically book produce in advance.