Sunday, November 30, 2008
By Jawwad Rizvi
LAHORE: The tobacco cultivated is less than one per cent of total irrigated area of the country but contributes handsome amount in national exchequer both through local consumption and exports.The industry has also been providing jobs to almost 1.2 million directly or indirectly. The federal board of revenue earned some Rs40 billion annually in shapes of excise and sales tax from the legitimate tobacco industry. According to a study the industry is the single largest contributor to the excise duty.Being a highly labour-intensive crop, about 100,000 persons are involved in its cultivation, over 75,000 are engaged in total 26 factories of the tobacco industry and another one million find indirect employment through its trading.However, country has been facing some Rs6 billion loss in revenue every year due to the un-regulated manufacturing of tobacco products.According to official estimates, the informal trade of tobacco products is stands around 20 per cent of total tobacco trade. As official export of cigarettes is not allowed thus legitimate industry does not use any illegal channels for export of cigarettes.Out of total 20 per cent of the tobacco trade in the informal sector, 10 per cent is counterfeit production and smuggling while 90 per cent was duty free import of foreign cigarettes in the personal luggage of travellers. There is a regular inflow of foreign cigarettes on every flight that lands in the country and being in the personal luggage of travellers these are customs cleared without paying duties.Smuggling of international brands of cigarettes has been on the rise in the recent past, which has hit hard local manufacturers in the country and badly affecting the government revenue.Previously, Pakistan’s tobacco and products did not have a good impression in the world markets due to poor quality and standards. However, investments in tobacco industry have been helpful to improve its image and position.Now Pakistan has become the fifth largest producer of some very fine FCV in the world with prospects of producing an optimum of up to 103.2 million kilogram. The investments in improved agronomic practices, use of fertilisers and pesticides, introduction of international grading system and state of the art green leaf threshing plants have led to yields of up to 2500 kilogram per hectare, which is one of the highest in the world. At the same time quality has risen close to the best world leaf standards and prices have also been extremely favourable.On the other hand the trend of exports since the last few years up to 2000-2001 was on the ascendant. During 1999-2000 exports were worth $5.4 million which grew by 85 per cent to $10.03 million during 2000-2001.During 2002-03 exports showed a growth rate of 34 per cent over the previous years and were registered at $6.24 million. It will be further observed that Pakistan exported 8270 tonnes tobacco valuing $11.08 million during the year 2003-2004. Total earnings from export of tobacco and its manufactures amounted to $13.23 million during the year 2003-04 as compared to $6.24 million during 2002-03 and $4.659 million during 2001-02. The exports during 2003-04 were thus 111.68 per cent higher than those of the same period July-June, 2002-03.Counterfeiting of famous brands’ cigarettes is an international phenomenon. In Pakistan, historically, the counterfeiting of cigarettes was started from Federally Administered Tribal Areas (FATA). Latter, it spread to settled areas of NWFP, certain districts of Azad Jammu and Kashmir territory and a few cities of the Punjab.It is need of the time that government should enact strict laws against smuggling and counterfeiting leading to severe punitive measures. There is a wide spread consensus that manufacture, distribution and sale of tobacco products should be regulated. There is a wide spread apprehension that over regulation will marginalise legitimate, tax-paying, regulated businesses employing thousands of people, and risk forcing tobacco products’ illicit, non-taxpaying, unregulated trade to flourish.The government officials somewhat reluctantly agree that in Pakistan, the illicit trade of tobacco manages a share of 20 per cent in the market. However the un-official number is still higher. If severe regulations are put on tobacco industry, without checking the illicit trade, then the inverse effect would lead to low tax collection, high unemployment and increased availability of cheap illicit cigarettes in the market.While legitimate tobacco industry in Pakistan has been compliant working closely with the government and has agreed to a number of steps suggested by the ministry of health, the unregulated sector continues to flout all rules.“While it suits the so called campaigners to target big businesses as this gives them satisfaction they rarely think about the growth potential of illegitimate sector that will eventually come about if the legitimate industry is put out of business,” said other tobacco industry sources.
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