Legal tobacco industry suffers severe financial crunch because tobacco users are now increasingly depending on smuggled and illicitly-manufactured cigarettes. Philip Morris (Pakistan) Limited Director Corporate Affairs Khurram Mohammad Qamar and General Manager Regulatory Affairs Farhan Ahmad said this at a media roundtable at the company's office, here on Friday. The company is involved in business of manufacturing and sale of cigarettes for Pakistan's domestic market.
"Among 16 Asian countries, Pakistan became the highest-ranked market as far as the consumption volume of illicit cigarettes in 2017 is concerned," Farhan said, quoting the 'Asia Illicit Tobacco Indicator Report 2017, prepared by the Oxford Economics, in September 2018. He exclaimed that the ranking remained the highest even after 14 percent decline in consumption. The report stated that 32.6 billion non-tax paid cigarettes, over one-fourth of all illicit cigarettes consumed across the sixteen markets in the region, were consumed in Pakistan alone, in 2017.
Khurram said that the government soared taxes on the tobacco with an aim to reduce the consumption of cigarettes, however, the consumption remained almost same while documented volume has declined as the users shifted to illicitly-manufactured or smuggled cigarettes, causing a huge tax loss to the national exchequer. "The government must know the dynamics of tobacco industry while formulating any policy," he urged.
He said legal domestic sales were estimated at 45.1 billion cigarettes in 2017 i.e. 7.4 percent fall as compared to 2016 and nearly 30 percent decline as compared to 2012. "In July 2017, then-government amended Federal Excise Duty structure by introducing a new third-tier covering low-cost brands in an effort to encourage producers of illicit tobacco to formalise in the market," he said, adding that achieving this goal is not possible without practical measures to stop smuggling and local illicit manufacturing. He said the government imposed minimum Rs35 tax on a single cigarette packet while smuggled/illicit cigarette packet is available at Rs 25 everywhere in the country. He said government needs to understand there is the competition. "We have invested some $800 million since 2017 and still suffer losses. We may continue to face same challenges," he said, adding that the company has set up one leaf thrashing and two production facilities in Pakistan. He claims the company contributed around Rs 116 billion to the national exchequer over the last five years.
He said local illicit companies mainly in Swabi, Mardan, etc., have set up state of the art machineries and are doing product marketing, offering consumer discounts with impunity.