PESHAWAR, May 1: The NWFP government has extended the scope of tobacco development cess to open market transaction in an attempt to improve its revenue base.

Previously, the tobacco development cess (TDC) was used to be charged to cigarette manufacturing companies purchasing tobacco from growers through Pakistan Tobacco Board at a rate of Rs 1.50 per kilogramme, said official sources.

However, through an ordinance promulgated by NWFP governor Syed Iftikhar Hussain Shah, not only TDC’s scope was extended to the open market transactions, its rate was also increased by 50 paisa per kilogramme to Rs 2 per kilogramme.

The ordinance was first promulgated on January 8, and re-promulgated on April 8, 2003 to keep it effective.

The ordinance titled “the North West Frontier Province Finance (second amendment) Ordinance, 2003 says that the extension in the scope of TDC “has been necessitated in line with the provincial government’s loan agreement with the World Bank.”

The World Bank extended first tranche of $90m under its Structural  Adjustment Credit (SAC) programme to NWFP in July last, thereby, the provincial government is required to improve its internal revenue base by readjusting rates of different taxes, fees, user charges and cess.

Official sources said that the TDC was, earlier, levied on the quota of tobacco allotted by Pakistan Tobacco Board to various manufacturing factories.

Since the quota covered only half of the production every year, the sale of equally large quantity of tobacco in the open market continued unabetted without TDC being charged on them.

The provincial government’s move of extending TDC to the open market transactions was expected to generate Rs 50m additional revenue annually, said the sources.

According to the re-promulgated ordinance TDC would also be charged to persons, other than tobacco factories, dealing in tobacco business, who are transporting tobacco outside the district of its production.

Sources, however, say the government is set to face a tough challenge from the joint opposition in the NWFP assembly over the issue of bringing the open market transactions under the ambit of TDC.