- Mango crops facing the adverse effects of climate change
- Fruits, vegetables and value-added industries facing high costs of production
- Import duty on spare parts of the value-added industry should be eliminated
Interview with Mr. Waheed Ahmed — Director, IAC.
PAGE: Tell me something about yourself, please:
Waheed Ahmed: I am currently the Marketing Director at Iftekhar Ahmed & Co. (IAC). As a Patron-In-Chief of the Pakistan Fruit & Vegetable Association (PFVA) and Chairman of Pakistan’s fruits, vegetables, food & beverage sector by the Ministry of Commerce, I try to ensure that I play a positive role in the economic growth of Pakistan, and do everything in my power to focus on the manufacturing of products within Pakistan that can be exported instead of relying on imports.
I have worked in a number of important roles in Government-related trade bodies and associations such as the FPCCI, export, fruit & vegetable, and horticulture committees. I was also recently appointed as the Chairperson of the Sectoral Council for Agriculture & Food Processing by the Ministry of Commerce, Government of Pakistan. By partnering with the government, I focus on creating stronger trading opportunities for businesses in Pakistan to boost the horticulture industry.
I have played a major role in the development of Pakistan’s trade relations, opening trade ties with 15 other countries where I was part of Pakistan’s business councils, and promoting Pakistan’s export potential to foreign governments.
I am a strong believer in the power of Pakistan’s youth, which accounts for around 60% of the country’s total population. I believe that with healthy activities and healthy food and drinks, the young population of Pakistan has a major role to play in the development of our country, and it is our youth to nurture and encourage the youth for a better future.
While having an exclusive conversation with PAKISTAN & GULF ECONOMIST, Waheed Ahmed, Patron-in-Chief of the All Pakistan Fruit and Vegetable Exporters Association (PFVA) said that the mango crop in Pakistan is facing the adverse effects of climate change during the current mango season as well, leading the production likely to be reduced by 20%.
The production capacity of mangoes in Pakistan is around 1.8 million M.tons, however, due to the effects of climate change, it is feared that the production is expected to decrease by 20% thus be limited to 1.44 million M.tons. Due to the long winter and delayed arrival of summer, mango production is decreasing and the ability to fight diseases in mango orchards is also diminishing. Mango crop is directly affected by changing weather patterns. He urged that research institutes and provincial agriculture departments shall provide resources and awareness to mango farmers to avert the negative impact of climate change.
The target of export of mangoes for this season has been set at 125,000 M.tons and if this is achieved, Pakistan will earn foreign exchange of US$100 million. The export of mangoes commenced on 20th May 2023. Gulf countries, Iran, Central Asian & UK countries are major buyers of Pakistani mangoes. Other important markets include Europe, Canada, USA and Japan.
An increase in the cost of export due to a reduction in production coupled with quality issues linked with climatic effects along with an increase in freight, packaging and transport costs is a major challenge for mango exports. Along with this, ongoing deteriorating law and order issues in the country, political instability and disruptions in delivery may also affect exports.
In Pakistan, 70% of mangoes are produced in Punjab, while the share of Sindh in total mango production is 29% & KPK’s share is 1%. 50% of mangoes are exported from Pakistan by sea, 35% by land and 15% by air.
While dilating on the forthcoming budget, he said All Pakistan Fruit and Vegetable Exporters Association has sent the budget proposals for the next financial year to the Federal Government. The proposal includes an allocation of 10 crore rupees for Research & Development in the context of cultivation of a new variety of kinnow, withdrawal of a 10% withholding tax on the juice industry, elimination of sales tax on mushrooms grown in Pakistan for promotion of mushroom production in Pakistan, reduction in fee for issuance of phytosanitary certificates, withdrawal of import duty on aseptic bags used in the pulp industry and exemption of import duty on spare parts used the juice industry.
Like other industries of the country, the fruits and vegetables and value-added industry is also facing problems due to the high cost of production hence it is important that steps should be taken to reduce the cost of production in the next budget for fresh fruits along with the value-added sector. He shared that since the orchards of kinnow in Pakistan are 60 years old and thus do not have the ability to fight against various diseases and production is also decreasing. Pakistan’s kinnow industry has an investment of 130 billion rupees, however, the export has declined from USD 220 million to USD 110 million. The kinnow industry consists of 250 processing factories and provides employment to a gigantic workforce of 250,000 people. If 10 crore dollars are allocated for R&D in the next fiscal year’s budget, the export of kinnow can be enhanced to 35 crore dollars during the next four years.
Waheed Ahmed said that the package juice industry in the country has a volume of 70 billion rupees, but it is feared that the sales will be reduced to 43 billion rupees. Due to a sharp decline in sales, the juice industry is not utilizing its full production capacity. Due to sales tax, new investment or production expansion plans are “standstill” leading to a reduction in revenue of the juice industry and associated employment opportunities. The juice industry is the main source of income for the farmers. In the year 2022, the local juice industry purchased one lakh tons of mangoes from mango farmers only, but during the current season, this purchase is expected to be less than fifty percent. The issues associated with the juice industry are also affecting the livelihood of our farmers. The imposition of a 10 percent federal excise duty (FED) on juices has led to inflation-prone consumers shifting to lower-priced and lower-quality juices that account for around 20 percent of the market and are largely part of the “undocumented” economy.
Due to the implementation of 10% FED on juices in the supplementary finance bill of February 2023, the sale of juices has decreased by 45% during March and April, making it difficult for the survival of this industry and the protection of farmers, hence it is imperative that 10% FE D should be withdrawn in the next budget. Currently, mushrooms are being imported from China and other countries while 70 to 80 percent of the demand for mushrooms is being met by imported mushrooms, although the weather and climate are favorable to mushroom cultivation in Pakistan, so mushrooms are grown locally. To encourage locally grown mushrooms, whether frozen, canned or bottled, sales tax on local mushrooms in all forms of packaging should be eliminated.
In the proposals sent to the Federal Government for the budget of the next financial year, the PFVA attributed an increase in the cost of export to an exorbitant increase in the fee for issuance of phytosanitary certificate which jumped from Rs.300 to Rs.2500 in September 2014. He said that an abnormal increase of 800% in the fee is unjustified, which has further multiplied the difficulties of the “By Air” exporters, who are already confronted with high freight costs, badly impacting the cost of exports and hence it is necessary to revise the fee of the phytosanitary certificate downwards bringing it back to a reasonable level. To meet the growing demand of the local juice industry, the concentrates, pulps and pastes are packed in imported aseptic bags but the import of these bags is subject to 20% import duty, 6% additional customs duty, 10% regulatory duty, 18% sales tax and 5.5% income tax. Due to the high rate of taxes, the cost of production has multiplied many folds. Aseptic bags help farmers to preserve their hard-earned produce for up to 2 years, providing economic benefits to farmers and providing consumers with high-quality, safe juice products. Since there is no substitute for imports of aseptic bags, the Association (PFVA) has proposed to abolish the import duty on aseptic bags in the next fiscal year’s budget.
Production units manufacturing mango, guava, peach pulp, kinnow, apple, carrot and beetroot concentrate, mango puree and tomato paste import spare parts from different countries since these spare parts are not available locally. There is an import duty of up to 35%, 2-6% additional customs duty, 18% sales tax and 5.5% income tax on the import of parts, leading to an increase in the cost of production, making it difficult for the Pakistani industry to compete in the international market as well as the local market. It is, therefore, necessary that the import duty on spare parts of the value-added industry should be eliminated in the upcoming budget.