KARACHI: The production of cigarettes in FY18 surges by 72 per cent.

According to the State Bank’s Statistical Bulletin September 2018, the cigarette production went up by 72pc to 59.06bn in FY18; however, revenue with this increased production was not available.

The production fell by 36pc in FY17 as the production declined to 34.34 billion against a total production of 53.52bn in FY16.

The fall in cigarettes production in FY17 slashed the government’s revenue while the gap created due to low production was filled with smuggled cigarettes from around the world.

The smuggled cigarettes also consumed the foreign exchange of the country.

The taxes and duties from cigarettes industry drastically reduced to Rs83.6bn in FY17, from Rs114bn in FY16.

This massive decline in revenue has compelled the government to encourage for higher production.

On September 19, some new policy measures were introduced by the newly elected government which revised upwards the federal excise duty (FED) on cigarettes and tobacco. This measure is expected to yield an amount of Rs26bn. The duty impact of FED on price per 20-packs of cigarettes will be Rs12.5 for tier-1, brands and Rs11 for tier-3 brands.

Earlier, FBR had said that third tier of FED was introduced to arrest the increase in market share of illicit, non-duty paid cigarettes which had reached almost 30pc of the total cigarette market. Pakistanis officially consumed 59bn cigarettes in FY18.

Cigarette prices vary roughly between Rs3-9 in the market. Even if the average price of a cigarette is considered Rs5, the nation used about Rs295bn for smoking in FY18.

Published in Dawn, September 23rd, 2018