ISLAMABAD, Feb 5: A sub-committee formed by the Senate Standing Committee on Commerce has started field work for determining the per kg cost of production of tobacco in order to resolve the ongoing controversy between the growers and cigarette manufacturers over prices.

Growers have been putting pressure on the government to frame a strategy for tobacco exports. They say they are not being paid reasonable prices by the cigarette manufacturers despite the rising cost of production due to skyrocketing prices of inputs.

While, cigarette manufacturers have threaten to import tobacco if the growers do not decrease prices. They are of the view that local prices are too high to be afforded further.

“We are now visiting different tobacco growing areas like Sawabi and parts of Mardan in order to determine the actual cost of production,” Agriculture Development Commissioner of the Federal Ministry of Food Agriculture and Livestock (Minfal), Qadir Bakhash Baloch, told Dawn.

Mr Bukhsh is heading the price determination committee’s field staff. The committee will collect all the data by the end of this week after holding talks with farmers, he added.

The committee comprises representatives of growers, Pakistan Tobacco Board (PTC) and cigarette manufacturers.

The tobacco growers were of the view that the cost of production was more than Rs62 per kg compared to the average Rs50 per kg they got this year from companies. They say that they never got fair prices because the bureaucracy of Pakistan Tobacco Board (PTB) has devised an unrealistic formula for working out the cost of production - which is calculated by taking the cost of inputs and adding 3 to 5 per cent to them.

According to this formula, the cost of production of tobacco does not include the cost of fuel wood, daily labour wages, chemicals, fertiliser and above all the rate of land lease, owing to which farmers are suffering huge losses.

Tobacco growers have also submitted the findings of a market research, they have conducted by the end of 2006, to the manufacturers, federal government and Senate Standing Committee on Commerce demanding the government to formulate a mechanism for raw tobacco exports to developed countries - where the sowing of the crop has considerably declined after the ban on smoking at public places.

According to the research paper, companies are earning 13 to 14 times more than the growers on each kg of tobacco. It states that around 1,000 cigarettes are made from one kg of tobacco, which makes 50 packs consisting of 20 cigarettes each. The highest brand is sold at Rs45 and the lowest brand for Rs12 per pack in the local market.

The average of both brands comes to Rs28.5 per pack. Taking this average, the paper states, companies earn about Rs1,400 per kg tobacco while the growers are paid about Rs50 per kg.

The tobacco growers association has also criticised the PTB for allegedly failing to save them from what they term “highhandedness” of tobacco companies. The paper states that tobacco contributes Rs25 billion to the national exchequer, 26 per cent of which come from the excise duty and sales tax.

According to PTB’s statistics, tobacco yield dropped to 2,000/2,200 kg per hectare in 2006 from 2,500-kg in 2005. Production of higher grade tobacco has dropped from 16.36 million kg in 2005 to 12.5 million kg in 2006. The average price paid on higher grades was Rs65.2 per kg in 2006 against Rs66 per kg the year before.

The production of medium grades, however, increased in 2006 and stood at 6.98 million kg compared to 4.59 million kg in 2005.

The average price increased from Rs57.6 per kg in 2005 to Rs59.14 per kg this year.