LAHORE: Federal Minister for Planning, Development and Reform Ahsan Iqbal has put his weight behind the formal domestic packaged fruit juice industry, assuring the manufacturers that he would push for the abolition of 20pc federal excise duty (FED) on its products in the upcoming budget.

The excise tax has resulted in a 41pc drop in the sale volumes of packaged fruit juices, which has led to a drastic reduction in the fruit and pulp purchases from the local farmers in the last two years and negatively impacted juice exports by making them uncompetitive.

“The minister has given assurance during a meeting with a delegation of the industry that he would recommend to the finance ministry to withdraw the levy from the export perspective. Mr Iqbal is of the view that the fruit juice industry has high potential for exports and fetching foreign exchange if the local industry flourishes and becomes competitive,” a spokesman for the Fruit Juice Council (FJC), an alliance of top multinational and local packaged fruit juice producers, said on Monday.

The industry points out that the imposition of this duty in the budget for the fiscal year 2024 to raise government revenues has proven to be counterproductive. The industry output and sales data for the last few years shows that the initial 5pc FED imposed on the formal juice industry in FY19 had resulted in a significant decline in sales. However, after its removal the industry experienced quick growth for three years, reaching an annual turnover of about Rs60bn in 2022.

“The industry was poised to exceed Rs71bn in sales in FY23 but the imposition of 20pc FED in addition to 18pc GST in July last year has caused a catastrophic decline, with sales plummeting to around Rs49bn,” the council says.

“This downturn has left the industry unable to utilise its production capacity, with no new investments made in the previous year, and none planned for FY25.”

Consequently, the industry has not been able to purchase fruit or pulp from fruit farmers because of the drop in the demand due to increase in the juice prices after imposition of high excise duty. In 2022, the industry procured an estimated 100,000 tonnes of mangoes, kinnows, apples, peaches and guava from local farmers for conversion into pulp, the FJC spokesman said. The procurement volumes have now declined by almost 50pc, negatively impacting sales tax revenues and the overall allied industry.

“Surplus fruit is available but there’s no buyer in the market,” according to the FJC.

Published in Dawn, May 28th, 2024