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Tag: Pakistan

  • Pakistani Growers Demand Fair Prices

    Pakistani Growers Demand Fair Prices

    In a letter to the Pakistan Tobacco Board (PTB), farmers demanded that the minimum indicative price (MIP) be examined for the upcoming purchasing season. The letter said historically the Economic Coordination Committee kept MIP almost equal to the cost of production (COP), and thus there was virtually no return for the eight months of rigorous labor.

    “Tobacco growers are playing a critical role in the tobacco industry, generating employment for thousands, revenue for the federal government through taxes and foreign exchange from exports,” the letter said. “Therefore, time has come to realize the contribution and hardships of growers.”

    The letter further said there was a dire need for improving the economic condition of growers because if they fail the tobacco industry will collapse and cause unimaginable economic and social loss to the country.

    According to the requirements of tobacco marketing law MLO-487, the average market price should not be less than the previous year. However, the letter noted, that the tobacco marketing law had been flagrantly violated by the companies and that the PTB constantly sided with those companies over the growers.

    Officials of companies said they purchased tobacco according to the price set by the government.

  • PTB Dissolution Hurts Farmers, Opens Illicit Market

    PTB Dissolution Hurts Farmers, Opens Illicit Market

    The Pakistani government’s decision to dissolve the Pakistan Tobacco Board (PTB) and hand over the regulatory authority to provincial governments has sparked months of controversy, and will likely have severe economic, social, and regulatory consequences, said Osama Siddiqui, a macroeconomic expert.

    “The PTB has played a pivotal role in regulating tobacco production and the industry under a centralized system that benefits all stakeholders, including farmers and the legal tobacco sector,” Siddiqui said.

    He added that the dismantling of the system could lead to a surge in illegal tobacco cultivation and sales, which would undermine the legal industry. One of the PTB’s critical contributions has been ensuring fair prices for tobacco farmers, especially in Khyber-Pakhtunkhwa (K-P), where the majority of Pakistan’s tobacco is produced. By maintaining a balance between supply and demand, the PTB has safeguarded farmers’ interests, providing them with a stable income.

    The expert fears that provincial governments lack the capacity to manage this responsibility effectively. Without the PTB’s oversight, the farmers could face financial hardships due to falling prices and market instability. A decline in tobacco production will deprive the farmers of their livelihoods and leave them vulnerable to exploitation.

    The PTB’s centralized regulation has also fueled growth in tobacco exports, which increased from $42 million in 2019-20 to $108 million by the end of 2024. Additionally, legal tobacco sales have made a substantial contribution to the national treasury by generating Rs237 billion ($853 million) in revenue through the federal excise duty and sales tax.

  • Pakistan: Growers Stuck Between Federal and Local Government Row

    Pakistan: Growers Stuck Between Federal and Local Government Row

    The row between the Pakistani federal government and the Khyber Pakhtunkhawa (KP) provincial governments over Rs4 billion (USD $ 14.4 million) of assets from the Pakistan Tobacco Board (PTB) has deepened as the process of devolution of the board to the province in the works.

    Mohammad Ayaz Khan, a former member of the board of directors of PTB, told Dawn that federal the government decided to hand over PTB to the provincial government. A majority of government departments were devolved to the provincial governments following the passage of the nation’s 18th Amendment, however, the tobacco board was held by the central government due to its value and revenue-generating potential.

    The KP government made it clear that the PTB reserves, pensions to its employees, salaries of various officials and workers, buildings, vehicles, and all other facilities should be managed by PTB through the levy imposed on tobacco produced in the province.

    As the two sides position, the growers are stuck in the middle. Liaquat Yousafzai, central president of the Tobacco Growers Association, said that neither the federal government nor the provincial government spent a single penny on tobacco development. Despite huge incomes, he said the growers were always exploited and PTB failed to play its due role in that regard, leaving tobacco growers constantly trapped in financial quagmire.

    According to the process, the federal government will transfer important functions of PTB to the provincial government and while the rightsizing committee will submit its report in the current month, and then it will be decided how to hand over PTB to the province. 

  • Growers: Pakistan Government to Establish New Tobacco Board

    Growers: Pakistan Government to Establish New Tobacco Board

     Representatives of farmers in Khyber Pakhtunkhwa (KP), Pakistan, petitioned the Pakistan Tehreek-e-Insaf-led provincial government to establish the Pakhtunkhwa Tobacco Board through legislation to protect and safeguard the rights and interests of poor growers in the province.

     “According to Pakistan’s Constitution, agriculture is a provincial subject,” said Liaqat Yousafzai, central president of the Tobacco Growers Association Pakistan. “However, the federal government had illegally and unconstitutionally taken control of it. Now, under the downsizing policy, the federal government has decided to either abolish or transfer certain government departments and institutions to the provinces, including the Pakistan Tobacco Board (PTB).”

    He urged the provincial government to seize the opportunity and set up the Pakhtunkhwa Tobacco Board to stop the ongoing exploitation of growers at the hands of existing PTB and the multinational and national tobacco companies. Local leaders have long argued control of tobacco should be handed over to the province as per the constitution.

    The Tehreek-e-Ittehad Kashtkaran Pakhtunkhwa leaders, including TIKP’s chairman Arif Ali Khan, senior vice-chairman Dawood Jan Khan of Ismaila, vice-chairman Iqbal Khan of Shewa, general secretary Asfandyar Khan, joint secretary Shahab Khan, Ahmad Jan Kaka of Marghuz and others also attended the meeting.

    “Now that the federal government has decided to withdraw from it and transfer the Pakistan Tobacco Board to the province, it is the responsibility of the KP government to move forward and take the control of the province’s most lucrative crop, tobacco, into its own hands,” Khan said.

    The speakers said the existing PTB was established in 1968 but did not include any provisions for the protection of the interests of tobacco farmers. Some protections for farmers were added over time, however, “due to the federal government’s lack of interest and at the behest of tobacco companies, the implementation of these laws had not been carried out in recent years, and the tobacco crop has been under the control of multinational companies,” they said. 

  • Pakistani Farmers Plan Protests Over Quota Cuts

    Pakistani Farmers Plan Protests Over Quota Cuts

    Tobacco growers in Khyber Pakhtunkhwa have announced a protest campaign against the Pakistan Tobacco Board (PTB) and purchasing companies, accusing them of favoring corporate interests and exploiting farmers. During a meeting led by Tehreek-e-Ittehad Kashtkaran Pakhtunkhwa (TIKP), leaders outlined a phased protest strategy, including public rallies in key tobacco-producing districts and sit-ins outside the PTB in Peshawar, Parliament House, and federal government offices in Islamabad. The growers are protesting a 14.2% reduction in the tobacco quota for 2024, claiming it was announced too late for them to adjust their planting decisions.

    The leaders demanded timely quota announcements, curbs on the smuggling of foreign cigarettes, and increased government support for tobacco exports to boost revenue and benefit farmers. They also criticized the lack of investment in tobacco-producing regions, despite legal obligations for companies to allocate 6% of profits to local development. Additionally, they called for the abolition of the contractual employment system in the tobacco sector and the removal of advance taxes on re-dried tobacco to improve growers’ livelihoods and ensure fair labor practices.

  • Illicit Trade Hurts PTC’s Sales

    Illicit Trade Hurts PTC’s Sales

    Image: Ali Sher

    Competition from illicit tobacco products caused Pakistan Tobacco Co.’s (PTC) sales to drop by 11.26 percent in the first quarter of the current fiscal year as compared to 2023-2024.

    “The legitimate tobacco industry in Pakistan faces continued challenges as illicit cigarette sales have reached alarming levels,” PTC’s senior regulatory affairs manager, Qasim Tariq, was quoted as saying by the Associated Press of Pakistan.

    During the period under review, PTC sold 6.3 billion cigarettes, against 7.1 billion in the comparable 2023 quarter.

    PTC is not the only organization impacted by illicit trade. In a recent statement to the Senate Standing Committee, the Federal Board of Revenue (FBR) revealed that 50 percent of cigarettes were being sold in Pakistan illegally, causing the government to miss out on much-needed tax revenue.

    Tariq attributes the problem, in part, to excessive tobacco taxation levels. In February 2023, the government increased the Federal Excise Duty by more than 150 percent, driving many smokers to purchase their tobacco on the black market instead. “As a result, there is an estimated PKR300 billion loss to government revenue which is essential for public services, infrastructure and economic development initiatives,” he remarked.

    While commending the FBR for its enforcement efforts against illicit tobacco trade, Tariq emphasized that isolated measures would not be enough to address the problem. He believes that the market for illicit products remains strong due the FBR’s limited resources and inconsistent enforcement at the retail level.

    “PTC strongly advocates for the full and consistent implementation of a track-and-trace system in all regions, including Azad Jammu and Kashmir, to enable authorities to identify and monitor products, reduce tax evasion and ensure only legitimate products reach consumers,” he said.

  • Small Packs, Big Problems

    Small Packs, Big Problems

    Tobacco companies may not sell packs containing fewer than 20 cigarettes in Pakistan. | Photo: Taco Tuinstra
    Tobacco companies may not sell packs containing fewer than 20 cigarettes in Pakistan. | Photo: Taco Tuinstra

    Pakistan’s dispute over cigarette exports to Sudan

    By Stefanie Rossel

    No matter the outcome, the situation is unlikely to yield any winners. In April, local news outlets reported that BAT subsidiary Pakistan Tobacco Co. (PTC) had asked Pakistan’s government for permission to fulfill a $20.5 million order from Sudan for cigarettes packed in boxes of 10 sticks each.

    The sale would require a change of law. Under its Prohibition of Sale of Cigarettes to Minors rule, Pakistan bans the manufacture of packs containing fewer than 20 cigarettes. Health activists believe that small packs encourage smoking among lower-income groups, including minors, because such packs are less expensive than packs containing more cigarettes.

    Pakistan Prime Minister Shehbaz Sharif approved PTC’s request on May 28 after a committee comprising members from various ministries argued that the 10-pack prohibition applied only to products intended for sale on the domestic market. The sale could proceed, the committee said, on the conditions that the manufacturer ensured product traceability, printed the text “For export purposes only” on each pack and agreed to submit quarterly export invoices to the health ministry.

    The latter, however, has dragged its feet on giving the required green light. According to local press reports, the ministry has referred the matter to the Ministry of Foreign Affairs. Meanwhile, PTC continues lobbying for a change of law.

    The plans face strong opposition from health groups. Soon after learning about PTC’s plans, the Campaign for Tobacco-Free Kids expressed concern, arguing that the move would not only jeopardize progress made in tobacco control but also directly target those most vulnerable to the harmful effects of tobacco consumption. The group’s country head for Pakistan argued that “kiddie packs” produced for export would inevitably find their way onto the local market, thus directly undermining efforts to discourage smoking among young people.

    In July, representatives of 25 member countries of the African Tobacco Control Alliance wrote a letter urging Pakistan’s prime minister to prevent PTC from exporting small cigarette packs to Sudan. “If a product is too dangerous for one country’s children, it is too dangerous for children anywhere,” the signatories wrote. “Putting other people’s children at risk of tobacco addiction, disease and death is unacceptable—don’t put our African kids at risk by changing your strong tobacco control regulations in Pakistan.”

    Due to the delay in obtaining permission, Sudan started contacting other countries to fulfill its order.

    Both Pakistan and Sudan are parties to the World Health Organization Framework Convention on Tobacco Control (FCTC), which obliges them to prohibit the sale of cigarettes individually or in small packs. However, the treaty does not define what constitutes “small.” Of the more than 180 FCTC signatories, at least 82 member states require cigarettes to be sold in packs containing at least 20 sticks.

    Weak Enforcement

    Daud Malik

    The parties in the dispute now find themselves in a catch-22 situation. For Pakistan, it’s the decision between monetary gain and its tobacco control commitment. Battered by a severe economic crisis characterized by high levels of inflation, dwindling foreign reserves and a depreciating currency, the nation could certainly use the income.

    PTC’s Sudan order, which the company says could be repeated, would bring valuable hard currency into the country. In March, the company was honored as one of Pakistan’s leading taxpayers. In 2023 alone, PTC paid more than PKR229 billion ($821 million) to the national exchequer in taxes and duties. According to Brecorder, the company has been exporting cigarettes to numerous foreign markets since 2019, earning the country $156 million. For the next fiscal year, PTC is targeting $60 million in exports. However, a third of that amount depends on the Sudan order.

    “In the context of Pakistan’s economy, this export order is insignificant,” says Daud Malik from the Alternative Research Initiative, which conducts research in a variety of fields, including tobacco control, health, education, governance and culture, in Pakistan. “However, its consequences are adverse and extremely damaging to the tobacco control efforts in Pakistan. It would send all the wrong messages to everyone working to end smoking in Pakistan. It would raise questions about Pakistan’s commitment to FCTC and the commitment to a smoke-free country.”

    Over the past decade, Pakistan considerably stepped up its tobacco control efforts, for which it was recognized by the WHO in 2021. In recent years, the country introduced a series of significant tax hikes on cigarettes. In February 2023, the government increased the federal excise duty on cigarettes by around 150 percent, resulting in a corresponding increase in cigarette prices.

    However, the tax hike also boosted Pakistan’s already flourishing illegal cigarette market. An Ipsos study in May 2024 revealed a surge in smuggled cigarette brands. With consumers shifting from expensive duty-paid products to duty-avoiding products made at home or smuggled in from abroad, illicit share tobacco sales were expected to exceed half of Pakistan’s total market this year. Most locally manufactured tax-evaded brands, the study found, are available in packs of 25 and 30 cigarettes, encouraging single-stick sales among retailers.

    For PTC, the loss of the Sudan order has other implications. If Pakistan does not allow exporting cigarettes in small packs, the company’s parent company may assign the order to affiliates in Bangladesh or Indonesia, a PTC official said. It would not be the first time that PTC lost export business because of Pakistan’s domestic regulations. In 2019, PTC lost an order for small packs from a customer in the Gulf region after the Ministry of Commerce gave permission but the health ministry did not.

    While struggling to fulfill export orders, the manufacturer has also been coping with increasingly challenging business conditions at home. In May, BAT reportedly threatened to pull out of Pakistan if the government further increased cigarette taxes. According to the company, existing taxation had already caused its sales in Pakistan to plunge by 38 percent. “The past couple of years’ developments on fiscal policies have raised questions about the sustainability of the company’s operations in Pakistan,” Michael Dijanosic, regional director for Asia-Pacific, the Middle East and Africa at BAT, was quoted saying in a meeting with the prime minister.

    Growing Tobacco Market

    Apart from the moral quandary implied by tobacco health activists about prevention of underage smoking in various continents, there is another ethical dilemma: Should a company export a product known for its adverse health effects to a country in the midst of a civil war?

    “Demand for nicotine and tobacco products is bound to go up in war-torn regions and volatile markets as people try to deal with heightened stress, uncertainty and the destruction around them,” says Samrat Chowdhery, journalist and director of the Council for Harm Reduced Alternatives, an Indian registered nonprofit that works on tobacco harm reduction measures. “This was also evident during Covid as smoking rates went up in response to stress despite WHO warnings linking smoking to severe outcomes.”

    With an anticipated cigarette market value of $1.9 billion in 2024 and a projected compound annual growth rate of 16.81 percent by 2029, according to Statista, Sudan is among the few countries still holding potential for tobacco companies. The local cigarette market is dominated by Haggar Cigarette and Tobacco Factory, a subsidiary of Japan Tobacco International, with a share of over 80 percent and BAT subsidiary Blue Nile Cigarette Co. The latter factory is based in Madani, which has been the scene of heavy fighting. The shift of production to Pakistan was meant to ensure the continuity of supply.

    Tobacco taxes are a major source of income for the Sudanese government, with hefty taxes levied on both domestic and imported brands. Recently, nonduty-paid cigarette sales have been a significant issue, which could be acerbated by a shortage in legal supply.

    “Denying people access to nicotine products in war regions in fact contributes more to their hardship than alleviates it, as smuggling takes over, hurting not just their meager resources as prices shoot up, like it is happening currently in Gaza,” says Chowdhery (see “In the Shadow of War,” Tobacco Reporter, October 2024). “But it also affects aid work as cigarette smuggling, due to higher profits to be made, gets prioritized over transporting aid supplies, which also in turn makes these shipments targets of attacks, hurting people in need of aid. In such an environment, ensuring safe, legal supply of nicotine or tobacco products is more humane and the lesser evil.”

    Chowdhery recalls a recent foreign policy podcast describing how loyalties can be bought with cigarettes in Gaza. “So if BAT can ensure a legal, duty-paid supply of cigarettes to Sudan that does not violate the country’s local regulations while Pakistan, which is also struggling financially, can earn some revenue, I don’t see why it is being framed as a negative, especially when the alternative is smuggled cigarettes, which do not earn both countries any revenue, while increasing criminality and increasing stress, withdrawals and the economic hardships of smokers as well as people in need of humanitarian aid,” he says.

    Stefanie Rossel is Tobacco Reporter’s editorial contributor. An experienced trade journalist, she combines sharp reporting skills with in-depth knowledge of the tobacco and vapor industries. Prior to joining Tobacco Reporter, Stefanie was editor-in-chief at Tobacco Journal International, where she worked for a decade. Fluent in English, German and French, Stefanie covers tobacco news around the world. She is based in Germany.
  • Pakistan Announces New Crackdown on Illicit Trade

    Pakistan Announces New Crackdown on Illicit Trade

    Photo courtesy of Syed Rashid Ali

    Pakistan’s Federal Board of Revenue (FBR) will significantly step up its crackdown on illicit cigarette sales, starting in January, reports the Associated Press of Pakistan. The government agency plans to hire additional enforcement personnel to support its efforts.

    According to the FBR’s projections, tackling illicit sales could generate between PKR200 billion and PKR250 billion in additional revenue annually, from PKR300 billion to more than PKR500 billion.

    The Action to Counter Illicit Trade (ACT) Alliance welcomed the FBR’s announcement, adding that collaboration across government agencies, provincial authorities and law enforcement was essential in achieving Pakistan’s economic goals.

    “We call on all stakeholders to support FBR’s efforts, reinforcing measures that strengthen tax compliance and encourage economic integrity,” ACT Alliance National Convenor Mubahsir Akram said.

    Seventy percent of cigarettes sold in Pakistan currently evade taxation.

  • PTC Risks Losing Sudan Small-Pack Order

    PTC Risks Losing Sudan Small-Pack Order

    Image: Maksym Kapliuk

    Pakistan Tobacco Co. (PTC) may lose a large order from Sudan if the health ministry continues to drag its feet on the required regulatory approval, reports the Business Recorder.

    Sudan has ordered $20.5 million worth of cigarettes, to be delivered in packets of 10 sticks of cigarettes each, from PTC. The sale of such packs is prohibited in Pakistan but allowed in Sudan.

    Prime Minister Shehbaz Sharif has granted PTC’s request for an exemption of the small-pack prohibition for exports, but the Ministry of Health has failed to issue the required amendment in the statutory regulatory order.

    Due to the delay, Sudan has now started contacting other countries to meet its domestic demand. A PTC official said that if Pakistan does not allow exporting cigarettes in small packets, the order may be shifted to Bangladesh or Indonesia.

    PTC has been exporting cigarettes since 2019 and has so far earned $156 million, bringing much-needed hard currency into Pakistan. For the next fiscal year, the company is targeting $60 million in exports.

    In the most recent fiscal year, the company paid PKR148 billion in federal excise duty and sales tax.

    It’s not the first time PTC has lost business due to the small-pack restrictions. In 2019, the company lost an export order to the Gulf. At that time, the Ministry of Commerce had given permission for exports, but the Ministry of Health withheld approval.

  • Activists Lament Tax Plans

    Activists Lament Tax Plans

    Photo: mrizwan

    Pakistan’s decision to maintain cigarette tax rates at their current level represents a missed opportunity, according to health activists, reports Business Recorder.

    Speaking at a forum organized by the Society for the Protection of the Rights of the Child, former Federal Minister for Information and Broadcasting Murtaza Solangi said the revenue could have been invested in public health, easing the economic burden on Pakistan’s healthcare system.

    Instead, he said, maintaining current tax rates benefits cigarette manufacturers without additional excise tax contributions, undermining tobacco control efforts and worsening the public health problems caused by tobacco use.

    “The government’s decision to spare the cigarette industry from any tax hike, despite the need to generate additional revenue to address the fiscal deficit, is concerning,” said Muhammad Asif Iqbal, director of the Social Policy and Development Center.

    He said that the government was unlikely to achieve its cigarette tax collection target of PKR324 billion ($1.16 billion) for 2024-2025 at current rates.

    Malik Imran Ahmed, country head of the Campaign for Tobacco Free Kids, said the prevailing rules allowed cigarette manufacturers to increase consumer prices without contributing more to excise tax revenue.

    This situation, he said, not only undermines tobacco control efforts but also risks exacerbating the public health problems caused by tobacco consumption.