$20.5 million export order lost because of red tape

PTC laments missed opportunity, highlights impact of anti-tobacco regulations, rising illicit trade

ISLAMABAD:

Pakistan recently missed out on a $20.5 million cigarette export order to Sudan due to bureaucratic delays, as disclosed by Pakistan Tobacco Company's (PTC) Senior Regulatory Affairs Manager, Qasim Tariq, on Thursday. The order, originally secured by PTC, would have brought much-needed foreign exchange to Pakistan. However, despite endorsements from the Special Investment Facilitation Council (SIFC) and Prime Minister's Office, delays from the Ministry of Health and pressure from anti-tobacco advocacy groups caused the deal to fall through, resulting in the order going to Bangladesh instead.

According to Tariq, anti-tobacco groups exploited clauses of the World Health Organisation's Framework Convention on Tobacco Control (FCTC) to challenge the export. He noted the irony, as the competing country is also an FCTC signatory. "This incident underscores how misinterpretation and the unchecked influence of advocacy groups can undermine public policy and economic growth," he remarked.

The lost contract not only impacted Pakistan's foreign reserves but also highlighted ongoing issues within the domestic tobacco industry. Tariq commended the Federal Board of Revenue (FBR) for its recent efforts to curb illicit tobacco trade but noted that enforcement efforts alone are insufficient. With a substantial portion of the cigarette market dominated by smuggled products, Pakistan faces a growing issue of tax evasion, especially in regions where enforcement resources are limited.

PTC has advocated for a full implementation of the Track & Trace system nationwide, including in Azad Jammu & Kashmir, to help monitor and reduce the sale of illegal cigarettes. Tariq criticised certain NGOs for not addressing the pervasive problem of smuggled cigarettes, which lack health warnings and often evade taxes, making them cheaper and more accessible than legal alternatives.

According to PTC, illicit cigarette sales now make up nearly 50% of Pakistan's tobacco market, exacerbated by a record 150% Federal Excise Duty hike in February 2023. The steep price increase, aimed at curbing smoking, has instead pushed consumers toward cheaper, illegal products, causing legitimate sales to plummet. Tariq highlighted that PTC's sales dropped by approximately 0.8 billion cigarette sticks in Q1 of this fiscal year compared to the same period last year, underscoring the financial strain on the legal market.

The economic impact of this shift is severe, with an estimated Rs300 billion in government revenue lost due to illicit sales. These funds, Tariq noted, could have supported essential public services and infrastructure development. The situation remains a pressing concern, as the Senate Standing Committee recently acknowledged that half of the cigarettes sold in Pakistan are illegal.

To counter this trend, PTC has called on the FBR to delegate enforcement powers to provincial authorities, enabling local police to take action against retail sales of smuggled cigarettes. Tariq emphasised that without a comprehensive and coordinated effort, including enhanced Track & Trace implementation and local enforcement, Pakistan's legal tobacco industry and economy will continue to suffer losses.