The juice industry is in dire straits as packaged juice volumes have plummeted by 45% following the government’s implementation of a 10% Federal Excise Duty (FED). Industry stakeholders are now calling for the withdrawal of this tax, expressing concerns about its detrimental impact on the sector and the rural economy.
The government introduced the 10% FED on beverages, including juices, nectars, and juice drinks, as part of the Supplementary Budget in February 2023. However, this move has sparked a fervent outcry from the juice industry, as sales figures have sharply declined. Industry stakeholders argue that the FED must be lifted to revive the sector.
The imposition of a 5% FED in July 2019 had already caused a significant 22% decline in sales, resulting in revenue losses for the government and a surge in the market share of the informal juice industry.
The formal packaged juice industry experienced a substantial 45% plunge in volumes during March and April 2023, directly attributed to the implementation of the 10% FED in February. The Juice Industry Alliance penned a letter to Commerce Minister Naveed Qamar, expressing the severe impact on business size and unfavourable consequences on sales tax revenue.
The shrinking formal packaged juice industry, which contributes approximately Rs14 billion in tax revenues, is significantly affected by these circumstances. The alliance further warned that industry sales are projected to plummet to Rs43 billion, contrasting with the anticipated growth of over Rs70 billion based on industry projections.
Speaking to The Express Tribune, Juice Industry Alliance spokesperson, Rahat Hussain said, the repercussions extend to the rural economy as well. The industry’s procurement of fruits, particularly mangoes, from local farmers for pulp production is expected to decrease by 50% post-FED implementation in 2023. In 2022, the industry procured an estimated 100,000 tonnes of mangoes, along with other fruits, from local farmers specifically for the purpose of converting them into pulp. Anticipated post-FED implementation in 2023 includes a drastic reduction in fruit pulp purchase, decreasing from approximately 61,000 tonnes to 31,500 tonnes.
This decline in volume will have adverse effects on the rural economy and hinder its formalisation, impacting farmers’ livelihoods, said Hussain.
The formal packaged juice industry plays a vital role in the economy, with an annual turnover of approximately Rs60 billion and an investment of Rs40 billion. It also provides employment to over 5,000 individuals. However, the shrinking business size is expected to lead to increased unemployment and hinder new investments. Moreover, the affordability of products manufactured by legitimate players is affected by the 10% FED, pushing consumers toward cheaper alternatives offered by the undocumented sector, which can compromise safety and quality, warned the letter.
The letter to the minister also highlighted the importance of fruit-based juices promoted by food regulation authorities, particularly in educational institutions. Local regulations mandate specific fruit content percentages for different types of fruit-based beverages, such as those set by the Punjab Food Authority which require fruit drinks to have a minimum of 8% fruit content, nectars to contain between 25% and 50% fruit content, and pure juices to consist of 100% fruit content, to provide consumers with accurate information.
The formal packaged juice industry also plays a crucial role in reducing food wastage and supporting farmers by procuring fruits in a timely manner. By adopting best practices, the industry assists farmers in their upliftment and overall development.
Published in The Express Tribune, May 25th, 2023.
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