Exponential surge in illicit cigarettes may lead to business shutdown: PTC.

ISLAMABAD -- Pakistan Tobacco Company (PTC) on Saturday said that an exponential increase in illicit cigarettes may lead to a business shutdown.

The official of PTC told the media in Jhelum that a steep decline in the volumes of the legitimate industry and a sharp increase in the sales of illicit cigarettes are being witnessed.

"The impact of rising excise rates is now becoming evident in the market", he added.

The excise increase in February 2023 coupled with the lack of enforcement has amplified the sale of illicit cigarettes including Duty Not Paid (DNP) and smuggled cigarettes.

Sharing the Pakistan Bureau of Statistics (PBS) recent data, he said volumes produced by the legitimate Tobacco Industry had declined by 50 percent in March 2023, which is the first month of sales after the exponential excise rate increase in February, whereas the total Large-Scale Manufacturing (LSM) decline was half of the tobacco industry at 25 percent.

The impact has also been witnessed throughout the year whereas during the period June 2022 to March 2023, the legitimate tobacco industry suffered a huge loss in production of 24%, three times the size of what the LSM sector witnessed.

This impact has led to the down-trading of consumers from legitimate cigarette brands to tax-evaded cheaper options, which are locally manufactured DNP cigarettes and undocumented, smuggled cigarettes.

Since January 2023, the volumes of DNP cigarettes and smuggled cigarettes have shot up by 32.5% and 67% respectively. This has led to the illicit sector growing to upwards of 42.5% of the total market.

In 2022-23, the share of the legitimate tobacco sector was 41.4 billion sticks while the illicit sector's share was 41.6 billion sticks.

However, after a recent irrational hike in FED on the tobacco industry, it is projected that the share of the legitimate tobacco sector in 2023-24 will be 29.6 billion sticks while the illicit cigarette share will reach 53.4 billion sticks in 2023-24. This means that 11.8 billion sticks will shift to illicit cigarettes.

Dispelling the impression created by so-called NGOs that the illicit cigarette industry share is only 9-18 percent, PTC officials said that the figures of such non-existent NGOs have no relevance. All these figures are neither authentic nor backed by any actual market research.

Senior Business...