Food processors have urged the interim government to withdraw the increased value-added tax (VAT) and other taxes imposed on agro-processed food products within the next seven days.

They also called on the government to refrain from raising gas prices, warning that they may be forced to suspend production activities if the government does not reconsider its plans.

They shared these concerns during a press conference at Dhaka Club in the capital today.

MA Hashem, president of the Bangladesh Agro-Processors Association (BAPA), said the VAT hike would result in a sharp decline in demand and adversely affect food processing factories, which directly employ 250,000 workers.

He noted that this sector engages a wide range of individuals, from low-income workers to marginal farmers.

"The government claims these measures will have minimal impact, but the reality is quite different," he said. "If we consider the culture of the people in Bangladesh, many low-income individuals start their mornings with a cup of tea and biscuits. However, with rising gas prices alongside higher VAT on confectioneries, it will no longer be possible to produce a Tk 5 biscuit."

He added that this would leave low-income individuals struggling even more to fight hunger.

On January 9, the National Board of Revenue increased the VAT and supplementary duty on more than 100 goods and services.

The duty on factory-made biscuits, cakes, pickles, chutneys, tomato paste, tomato ketchup, tomato sauce, and mango, pineapple, guava, and banana pulp has increased from 5 percent to 15 percent.

Additionally, the supplementary duty on fruit juices and fruit drinks has risen from 10 percent to 15 percent. The supplementary duty on artificial or flavoured drinks and electrolyte drinks (non-carbonated) has increased from zero to 15 percent.

At the merchant level, the previous tax rate of 5 percent has been raised to 7.5 percent.

The BAPA also announced plans to seek a direct meeting with Chief Adviser Prof Muhammad Yunus regarding the issue.

They expressed optimism that a favourable decision can be achieved if they are able to directly convey the potential consequences of these measures to the chief adviser.

Ahsan Khan Chowdhury, chairman and chief executive of PRAN-RFL Group, said they process a variety of agricultural products, such as mangoes, tomatoes, pineapples, and bananas, to produce juices, pickles, and sauces.

"If the prices of these products rise due to increased VAT and gas prices, many consumers will stop buying them. This will severely impact marginal mango, banana, and tomato farmers," he said.

He further warned that factory shutdowns resulting from these price hikes would leave countless workers facing uncertainty and hardship.

Chowdhury urged the interim government to revoke the increased VAT and duty on processed food products and reconsider the decision to raise gas prices.

"We are already grappling with challenges such as high inflation, high interest rates on loans, complications in debt securities, instability in the dollar market, the 2024 general elections, the July-August uprising, and recent labour unrest due to salary hikes," he said.

"In this critical situation, both businesses and the public are alarmed by the increased VAT."

Iqtadul Hoque, general secretary of BAPA, said that if gas prices rise again, the entire sector could face a severe crisis.

"Increased operational costs would jeopardise the competitiveness of exports, risking the loss of vital export markets. This, in turn, would deliver a significant blow to the economy," he said.

He added that measures intended to boost government revenue could ultimately prove counterproductive.

Shafiqur Rahman Bhuiyan, president of the Bangladesh Auto Biscuit and Bread Manufacturers Association, said agriculture and processed food products are among the top five export sectors of the country.

"In this context, any sudden increase in VAT and gas prices would severely hinder the export sector," he said.

Rising production costs would make Bangladeshi products less competitive and potentially lose market share to neighbouring countries, including India, Pakistan, Thailand, and Vietnam, he added.

Moreover, a reduced price gap between domestic and imported food products would harm the local industry, Bhuiyan noted.

Sayef Nasir, managing director of SMC Enterprise, said that when food inflation is high, consumption falls, making it very difficult to sustain the business.

He added that if product prices increase, the number of sales decreases.

Against this backdrop, he questioned how the government expects its revenue to increase even with the VAT hike.

The agro-food processing industry contributes 7.7 percent to the country's gross domestic product.

Currently, BAPA has around 400 active members, while approximately 500 companies are engaged in processed food production, employing over 500,000 workers.