Tobacco industry decries lack of enforcement measures

Says regulators have failed to stop sale of cheap, smuggled cigarettes

ISLAMABAD:

The tobacco industry has expressed concerns over the slack enforcement measures taken by regulators that have failed to stop the sale of cheap, smuggled cigarettes being marketed even without health warnings.

Talking to media on Saturday, Pakistan Tobacco Company (PTC) spokesperson Sami Zaman said that illicit cigarettes would take over the market of legal industry in the next quarter with more than 50% market share.

“Taxes are not paid on smuggled cigarettes that’s why they are cheap; they also do not have the mandatory health warnings as per laws of Pakistan and offer attractive flavours that are even sold in loose packaging,” Zaman pointed out.

He also criticised health activists for not raising voice against smuggled cigarettes and the unregistered cigarettes manufactured in the country.

The industry had earlier announced that it would purchase 85 million kg of raw tobacco from farmers but only 72 million kg are available. Because of the shortage, tobacco prices have gone up in the current season.

Investors entered the tobacco market, pushing up the price to Rs1,400 per kg compared to the minimum tobacco support price of Rs310 per kg. Now, the price has decreased to Rs1,000 per kg.

The PTC official pointed out that tobacco was the only crop that was protected under the law, but a lack of enforcement mechanism to stop the illegal buying of tobacco triggered the manipulation of prices.

The price of tobacco in Bangladesh stood at $2.96 per kg, in the Philippines it was $1.5 per kg while in Pakistan it was $4.75 per kg.

“Price uncertainty has restricted exports of processed tobacco from Pakistan,” Zaman remarked, adding that PTC exported processed tobacco to cigarette manufacturers in many countries.

He revealed that the cigarette industry was expecting exports of 42 million kg, which would fetch around $100 million in the current fiscal year.

Owing to unchecked smuggling of cigarettes into Pakistan and despite increase in duties by 160% in February 2023, the government has failed to achieve the revenue collection target of Rs180 billion from the cigarette industry.

Following the increase in duties, the government had revised upwards the revenue target to Rs249 billion with additional receipts of around Rs70 billion. However, the actual collection stood at Rs174 billion in fiscal year 2022-23.

The manufacturing of cigarettes by the legitimate industry declined 44% in June 2023 and 28.4% in the entire fiscal year from July 2022 to June 2023.

Published in The Express Tribune, August 20^th, 2023.

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