Delay in amending SRO results in blockage of major cigarette export order

ISLAMABAD: Despite the approval of Prime Minister Shehbaz Sharif, the Ministry of Health has not issued the necessary amendment in the Statutory Regulatory Order (SRO) for the export of 10 cigarettes packets to Sudan.

Sources told Business Recorder that the Health Ministry’s delay has resulted in the blockage of a major export order to Sudan in an economic crisis where the government is desperate to enhance exports.

On one hand, the government claims to enhance exporters, but practically this is what is happening with the exporters.

PM Shehbaz Sharif had given approval of the export on May 28, 2024. However, to date, the Ministry of Health is reluctant to issue the required amendment in the SRO. Due to prolonged delay, Sudan has now started contacting other countries to meet its domestic demands. Over 52 days have passed but the notification has not been issued by the concerned ministry.

The company has repeatedly conveyed to the government that manufacturing 10 packs is only for exports and will not be sold in Pakistan and has sought a change in rules to meet the Sudanese order requirements.

Multinational companies with factories in Bangladesh and Indonesia are more into exports. The PTC official said that if Pakistan does not allow exporting cigarettes in small packets, the order may be shifted to Bangladesh or Indonesia.

The Prime Minister had also constituted an inter-ministerial committee comprising members from the Ministry of National Health Services Regulation and Coordination, the Ministry of Foreign Affairs, the Ministry of Commerce, the Ministry of Industries and the Ministry of Law and Justice. The Committee reviewed the proposal to amend, “The Prohibition of Sale of Cigarettes to Minor Rules 2012” to allow the export of small packs of cigarettes.

The said inter-ministerial committee after its two meetings recommended that required changes should be made in the relevant SRO to allow exports of 10 cigarette packs to Sudan. The committee also recommended that track and trace should be ensured on production on 10 cigarette pack along with writing clearly, “For exports purposes only” on the front side of each pack in red colour. The committee also recommended that the manufacturer should quarterly submit exports invoices to the Health Ministry.

The Prime Minister after reviewing recommendations of the committee approved on 28 May 2024 for further necessary action.

The Ministry of Law and Justice has also vetted the draft SRO to amend the “The Prohibition of Sale of Cigarettes to Minor Rules 2012” but the Health Ministry is still reluctant to issue the amended SRO. The Ministry of Law and Justice has also conveyed its consent subject to the approval of the federal government.

The amended notification stated, “Cigarette manufacturer shall manufacturer a packet of 10 cigarette sticks for and only export order,” the draft amendment added.

The Pakistan Tobacco Company (PTC) has a deadline of May 15 to deliver cigarettes in packets of 10 sticks to Sudan but the slow decision-making process on the government side have become an obstacle.

The PTC received a $20.5 million export order from Sudan, which requires the order to be delivered in packets of 10 sticks of cigarettes each. Pakistani rules prohibit the sale of cigarettes in small packets of 10 sticks, but there is no such restriction in Sudan, according to the PTC officials.

On the other hand, the Law and Justice Division has informed the Prime Minister that the prohibition is limited to the domestic sales of tobacco products within a country and does not apply to cross-border transactions.

The PTC has been exporting cigarettes to numerous world markets since 2019 and has so far earned $156 million for the country. For the next fiscal year, the company is targeting $60 million in exports, but one-third of the order is at stake due to the Ministry of Health’s reluctance to issue amendments in the Statutory Regulatory Order (SRO) for export purposes.

During the last year, the company paid Rs148 billion in taxes in the form of federal excise duty and sales tax.

According to the Prohibition of Sale of Cigarettes to Minors rule, no cigarette manufacturer shall manufacture, sell, or offer for sale any cigarettes unless they are in a packet of at least 20 cigarettes in Pakistan.

It is unfortunate that despite these rules, a customer can buy even a single cigarette from the retailers which defeat the purpose of selling cigarettes in 20-stick packs. This shows weakness in the implementation of laws by the government authorities.

The PTC has requested the government to amend the rules for export purposes only. Pakistan and Sudan are signatories to the Framework Convention on Tobacco Control (FCTC) by the World Health Organisation.

It is permissible to sell cigarettes in packets of 10 in Sudan. The company has already lost an international export order to the Gulf countries in 2019 due to a lack of clarity on 10-pack cigarette manufacturing. At that time, the Ministry of Commerce had given the go-ahead for exports, but the Ministry of Health had not agreed.

It is general practice that the exporting companies follow the rules and regulations of the importing nations — a principle that Pakistan’s Ministry of Health is ignoring.

Copyright Business Recorder, 2024