ISLAMABAD: Tobacco farmers belonging to Khyber Pakhtunkhwa have warned the government of severe protest if exorbitant increase in federal excise duty on cigarettes was not reduced as it was hitting the economic prospects of tobacco farmers.

“These high duty rates will not benefit anybody neither the tax collecting body nor anti-tobacco groups because smuggled foreign cigarettes have already started to flood Pakistani markets,” said Mushfiq Ali Khan, president of Anjuman-i-Kahstkaran (KP).

In a news conference on Tuesday, the farmers said that they saw foreign cigarettes openly available in shops, and the only difference was that low quality cheap brands were sold in villages and smaller areas while higher brands were on display in Islamabad.

Say this will not benefit anyone as smuggled foreign cigarettes already in markets

Mushfiq Ali Khan said tobacco was cultivated in many areas of Khyber Pakhtunkhwa only because it was the most viable cash crop in those areas. Farmers from Mardan and Swabi districts pointed out the negative social and economic impact on tobacco farmers due to the increase in federal excise duty on cigarettes, which includes resurgence of the illegal cigarette industry.

Another farmer Ali Ahmed and Mohammad Siraj highlighted that tobacco sales will eventually shift from the legal industry to illegal cigarette makers, and it will reduce the economic prospects for farmers as the unregulated industry gives very low rates to farmers and often delays payments too.

In Pakistan, only two companies with a market share of 60pc pay 98pc of the total revenue received from cigarettes, while the rest of the illegal industry contributes only 2pc to the national exchequer, despite having a market share of around 40pc.

The government collected taxes worth Rs153 billion from these two companies in the financial year 2021-22, while the tax collection target from this sector for the current fiscal year was Rs200 billion which has been increased to Rs315 billion.

Nishat Ali said that the legal and organised cigarette industry is also playing an important role in improving the quality of tobacco cultivation in Pakistan, adding that multinational companies have provided tobacco farmers with the necessary equipment and machinery to modernise tobacco cultivation, whereas unregistered cigarette makers encourage farmers to cultivate “non-recommended” varieties as it was low cost.

Published in Dawn, March 29th, 2023