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Illicit cigarettes grabs 50 percent market share in Pakistan

ISLAMABAD (Eshfak Mughal): The market share of illicit cigarettes has touched 50 percent in Pakistan mainly due to high rates of taxes and duties on legitimate cigarettes industry and easy availability of cheaper and unrestricted smuggled cigarettes in countrywide.

This was revealed by the officials of Pakistan Tobacco Company (PTC) in the media briefing to the Islamabad based journalists during the visit of Akora Khattak, KP Province.

According to the officials of the cigarettes manufacturer company, the market share of illicit cigarettes has increased from 46.73 percent to 49.82 percent during three months. Consequently, the market share of legitimate industry has been shrunk from 53.27 percent to 50.19 percent during the period. The data shows that the market share of illicit cigarettes will trump to the legitimate cigarettes industry’s volume during next quarter.

The officials of the PTC, the production of the legitimate cigarette industry has been declined by 32 percent during the last fiscal year as compared to the last fiscal year after increasing 200 percent taxes on Legitimate Tobacco Industry in the country.

They also said that the govt has slapped heavy taxes and duty on Feb 2023 to secure IMF loan program and to control the trend of smoking. According to the data of the PTC, this policy could not give desired results. They told the journalists that the demand of the cigarettes could not decline due to heavy taxation on the legitimate cigarettes.

The illicit cigarettes has taken over the market and legitimate industry has been squeezing day by day as smuggled and illegal cigarettes are being sale in the market which are very cheaper as compared to the legitimate cigarettes.

While responding of a query, he said that the government failed to achieve the target of the taxes and duties due to low production of legitimate cigarettes after introducing the mini budget in Feb 2023. The Federal Board of Revenue has collected only Rs.175 billion against the Rs.240 billion during the last fiscal year and it will further down in next calendar year, they said.

The officials of the PTC further said that the 30 percent male young population of the country is smoking addicted, however, the country has no data about the female smokers as the law of the country doesnt permit to conduct survey on the female smokers in the country.

Contrary of this claim of the officials of the PTC, the Voice of Public has found research report of “Wold Population Reveiw”. The World Population is a US based independent for-profit organization A committed to delivering up-to-date global population data and demographics.

According to the research report, the 20 percent of the total population including 33.6 percent male and 6.4 percent female are addicted smokers in Pakistan.

They said that the cigarette factories which involve tax evasion are involved in the process of purchasing tobacco on high rates. These illegal cigarette factories should be made in accordance with the law.

The officials further highlighted the issue and said that an industry’s demand estimate of 85 million kg was submitted to the Pakistan Tobacco Board for the current season, however, 72 million kgs of tobacco could be cultivated in the current season due to monsoon rains and flood. In the current situation, there is a shortage of 13 million kg of tobacco.

The government has set a minimum price of 310 rupees per kg of tobacco. In the current season, tobacco is being sold from Rs 430 per kg to Rs 1400 per kg.

Due to the increase in tobacco prices, there has been a sharp decline in Pakistan’s tobacco exports due to high rates of tobacco and heavy taxation on cigarette industry. The Pakistan has exported 25,508 tonnes worth $63.91 million during the last fiscal year. The country has also exported 860 tonnes worth $2.048 million during July 2023 as compared to 58 percent less than the same month of the last fiscal year as it had exported 1,367 metric tonnes worth $4.917 million.

The track and trace system of the FBR has not yet been implemented in all cigarette factories to curb the tax evasion. Tax Stamp Enforcement still a distant dream due to court orders.

Govt should immediately implement track and trace on cigarette factories in Azad Kashmir, the said.

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