KARACHI: Cigarette production dropped 35 per cent in 2016-17 to 34 billion sticks from 53bn sticks a year ago.

Pakistan has been one of the top producers of cigarettes due to vast availability of tobacco in the country particularly in Khyber Pakhtunkhwa.

The cigarette and tobacco industry was so attractive at one time that it ranked the second highest in attracting foreign direct investment after the financial sector.

The latest official data for FY17 shows that the cigarette production remained slightly over 50pc of the record production of 64bn cigarettes in 2005-06. The 2016-17 production was even lower than the 2002-03 figure, the data showed.

In 2002-03, the total number of cigarettes manufactured was 49.37bn; it rose to 55.40bn in 2003-04; again jumped to 60.10bn in 2004-05 and finally reached 64.14bn in 2005-06.

A JS Research report issued on Wednesday said the cigarettes prices fell by over 16pc on a year-on-year basis.

Unchecked smuggling of cigarettes has affected local manufacturing

“Sharp decline in cigarette prices (16.4pc year-on-year) amid changes in the duty structure has kept the CPI readings in check during recent months,” said the report.

The cigarette production fell by 35.8pc in 2016-17. Philip Morris (Pakistan) Limited was contacted to know the reason for this plunge, but the company - having a share of around 50pc in the cigarette industry - avoided to comment.

The lucrative cigarette industry had a stock of foreign investment worth $3.79bn by end

of December 2015 higher than the investment in oil and gas exploration and only preceded by the financial sector which had an investment of more than $7bn.

Wholesalers and retailers said the smuggled cigarettes have got a substantial place in the domestic market. Retailers said they were selling cheaper cigarettes from Iran, China, South Korea and other countries.

They also said a very popular Pakistani cigarette brand did not reduce its price during the two months of the current fiscal despite the revised duty structure.

Market sources said the unchecked smuggling of cigarettes has affected the local production while unbranded cigarettes also have a market in the country.

A rough calculation shows that Pakistanis consumed around Rs200bn worth of cigarettes in 2005-06.

The current calculation shows that despite the fall in production, the consumption is still around Rs200bn with the price per cigarettes averaging on Rs6 per cigarette.

Published in Dawn, September 7th, 2017