Increased FED on cigarettes to hurt interests of farmers of economically marginalized areas

LAHORE: Tobacco farmers of KPK’s economically marginalised areas have warned that recent exorbitant increase in federal excise duty (FED) on cigarettes will reduce economic prospects for tobacco farmers.

Tobacco farmers from Mardan and Swabi district of Khyber Pakhtunkhwa growers while expressing their concerns about the difficulties faced by the legal cigarette industry, pointed out the effects of the factors promoting illegal cigarettes in the country. Tobacco farmers said that tobacco is an important cash crop and any threat to this crop is a threat to the survival of tobacco farmers which could cause serious socio-economic consequences.

They said the transfer of a large portion of the tobacco crop from the legal industry to illegal players would reduce economic prospects and result in inordinate delays in payments, affected cash flow, and unemployment.

Only two tobacco companies, with a market share of around 60% contribute 98% of the tobacco tax collection whereas all other tobacco companies operating locally contribute only 2% to the national exchequer despite having a market share of about 40%. More than 90 tobacco companies default on taxes causing a loss to the national exchequer.

It is worth mentioning here that the government collected Rs 153 billion in taxes from two companies in 21-22 while a target of Rs 200 billion was set for 22-23 that was further revised to Rs 315 billion slapping the legal tobacco industry with additional taxes of more than 150%.

The farmers said that tobacco cultivation areas are considered resource-deprived and poverty-stricken areas. The legal cigarette industry pays better and timely prices for tobacco. If tax measures threaten the survival of the legal cigarette industry, the future of thousands of farmers associated with the industry will also be at risk.

Farmers also expressed fear that if the employment of tobacco farmers is threatened, they may be forced to become the tool of anti-national elements for their survival which will also be a threat to the integrity of the country.

Mushfiq Khan, representative for the farmers, said that the legal and organised cigarette industry played a crucial role in improving the quality of tobacco cultivation in Pakistan.

Multinational companies provided machinery and equipment to modernize tobacco cultivation, introduced more efficient furnaces to reduce energy costs and provided guidance and support to limit environmental impact, he said.

Documenting the business of illegal cigarette manufacturers will end the exploitation of tobacco farmers and improve their standard of living.

Copyright Business Recorder, 2023