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.
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.
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’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.
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.
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.
The African Tobacco Control Alliance (ATCA) has urged Pakistan to prevent British American Tobacco from exporting cigarettes in packs of 10 sticks to Sudan, reports The Independent.
Pakistan prohibits the sale of cigarettes in such packs on its domestic market. BAT subsidiary Pakistan Tobacco Co. (PTC) has asked the government to make an exemption for a large order from Sudan, which permits the sale of 10-stick packs on its territory.
In its statement, the ATCA urged the Pakistani government to reject PTC’s request, emphasizing the need to protect children from the dangers of smoking.
According to the ATCA, the 20-cigarette per-pack rule is the global standard for the protection of children. Because packs with fewer than 20 cigarettes are less expensive, the argument goes, it is more likely that underage buyers will purchase them. The ATCA refers to such packs as “kiddie packs.”
At least 82 countries have laws requiring a minimum of 20 cigarettes a pack.
“BAT is pushing you to change regulations so that it can manufacture 10-stick cigarette packs and export them to Sudan, the ATCA wrote in its letter to the government of Pakistan. “However, the WHO Framework Convention on Tobacco Control in its Article 16 calls on parties to prohibit the sale of cigarettes in small packets, which increases the affordability of such products to minors. Consequently, Pakistan as a party to the convention should not allow manufacturing of 10-stick cigarette packs.”
The organization condemned BAT’s explanation that the 10-stick packs will be sold only in Sudan, noting that if the tobacco giant is allowed to succeed with this plan in Sudan, other African countries would be next. “It is unconscionable that BAT thinks it is ok to change a law on one continent in order to target vulnerable populations on another,” ATCA wrote.
“In Sudan and other countries in Africa, people need food, medicine and other lifesaving supports. What they do not need is kiddie packs of cigarettes that put them at increased risk of tobacco addiction, diseases and death. And we know that once BAT gets kiddie packs into one country, they will make their way across Africa.”
Legally operating tobacco companies have welcomed Pakistan’s plan to impose a federal excise duty (FED) on acetate tow, reports The Express Tribune.
While presenting the federal budget in the National Assembly on June 12, 2024, Finance Minister Muhammad Aurangzeb proposed imposing an FED of PKR44,000 ($158) per kg on acetate tow, a basic raw material used in manufacturing filters.
Aurangzeb said the recommended FED would burden only the informal sector. Because Pakistan does not produce acetate tow, cigarette manufacturers import the material from other countries.
During his presentation, the minister lamented the widespread availability of illicit, smuggled and tax-evaded cigarettes in Pakistan.
The market share of illicit cigarettes has grown to 63 percent at present from around 40 percent a few years ago. While at least 24 cigarette manufacturers operate in Pakistan, less than a handful are registered with the government. The two leading formal tobacco companies alone pay 98 percent of the total tax collected from the cigarette industry. Some politicians are reportedly involved in the manufacture of undocumented cigarettes.
One official said the government could potentially collect PKR550 billion from cigarette manufacturers if it succeeds in bringing the out-of-tax-net makers into the tax net.
Earlier governments imposed heavy taxes on cigarettes to discourage people from smoking. However, instead of decreasing cigarettes sales, the strategy mostly diverted smokers to non-tax-paid cigarettes.
Cigarette manufacturers have been urging the government to crack down on illicit cigarette sales and more forcefully enforce the country’s track-and-trace system. They say that half-hearted implementation has badly hit the formal sector while providing an opportunity for illicit cigarette manufacturers to thrive.
Pakistan Tobacco Co. (PTC), a BAT subsidiary, is lobbying the Pakistan government to allow export of 10-piece cigarettes packs to Sudan, reports The Guardian. Pakistan is one of more than 80 countries that prohibits the sale or manufacture of 10-piece cigarette packs. Sudan, by contrast, permits such packs.
In a letter to the government, PTC said it “received a new export order to manufacture for Sudan, which includes packs of 10 cigarettes.”
PTC told the government that exempting export orders from the 10-cigaratte pack ban would benefit Pakistan as the order is worth $20.5 million and could be repeated.
Health activists urged the government to deny the request. “It is beyond shameful that British American Tobacco is seeking to alter the law in Pakistan so that it can flood an African country in crisis with cheap cigarettes,” said Mark Hurley, vice president of the Campaign for Tobacco-Free Kids. Sudan is currently in the midst of a civil war.
According to Hurley, over 80 countries have banned sales of small packs, requiring at least 20 cigarettes per pack, “because evidence shows these cheap packs are used to target kids and vulnerable populations.”
“Exploiting not only this knowledge but a country facing a humanitarian crisis is the behavior of a company that will truly stop at nothing to sell and addict more people to cigarettes,” he said.
BAT countered that the export order was intended to replace domestic manufacturing by its Sudanese subsidiary Blue Nile Cigarette Co. (BNCC), which is based in Madani, where there has been heavy fighting in the civil war.
“To ensure the continuity of products to meet consumer demands in Sudan, which predominantly operates in cigarette packs of 10, Pakistan was given the export order to supply to BNCC,” said a BAT spokesperson. “The clearance for the export order of cigarette packs of 10 from Pakistan to Sudan is pending regulatory approval by the government of Pakistan. The clearance complies with all local laws and regulations in Sudan.
“For any products manufactured by BAT, we abide by strict marketing principles to prevent marketing and sales to underage [consumers]. These measures include prominent 18-plus age warnings on packaging as well as our communications.”
Pakistan’s 2023 federal excise duty (FED) hike on tobacco products has diverted rather than reduced cigarette consumption, reports The News International, citing recent research.
In 2023, the government announced a significant cigarette tax hike, prompting tobacco companies to more than double their cigarette prices.
The fiscal measure aimed to boost revenue and discourage smoking. However, a recent study conducted by the Lahore University of Management Sciences (LUMS), suggests it has achieved neither objective.
Instead of lowering smoking rates, the increased prices have prompted consumers to source their cigarettes from informal sources, a development that will likely cause the government to miss PKR300 billion ($1.08 billion) in tax earnings this year, according to LUMS.
The LUMS study found that the share of duty-paid cigarettes shrank to 42 percent over the past two years.
“Government has implemented various initiatives to address the extent of illicit sector to bring more companies and illicit sector under tax net,” said LUMS Associate Professor of Economics Kashif Zaheer Malik. “These, however, have not been successful in reducing illicit trade in Pakistan.”
In light of Pakistani smokers’ profound price sensitivity, the LUMS report urged the government to reconsider its excise tiers. It also said the success of Pakistan’s track-and-trace system would depend on an all-encompassing rollout and consistent enforcement.
In related news, the government of Pakistan’s Khyber Pakhtunkhwa (KP) province announced a 400 percent tobacco tax increase.
Civil society groups welcomed the measure. “This substantial increase is projected to generate over PKR2 billion annually, which will be dedicated to enhancing health facilities across KP,” Blue Veins and the Provincial Alliance for Sustainable Tobacco Control wrote in joint statement.
Tobacco growers warned the tax hike would destroy the sector. “The farmers can’t afford this and will stop growing tobacco,” Pakistan Tobacco Board member Rustam Khan was quoted as saying by The News International.
“Tobacco crop is the only cash crop of the province. And around 1.2 million people in the province depended on it,” said Khan, adding that more than 75,000 farmers were involved in tobacco cultivation.
Tobacco taxation has been a contentious topic in Pakistan recently. In May, market leader Pakistan Tobacco Co. threatened to cease operations in the country if the government further increases cigarette taxes.
