Pakistan loses $20.5 million cigarette export contract due to bureaucratic delays

Pakistan has lost a lucrative $20.5 million cigarette export contract to Sudan due to delays in decision-making by the Ministry of Health.

This critical setback was revealed by Qasim Tariq, Senior Regulatory Affairs Manager at Pakistan Tobacco Company (PTC), during a media briefing on Thursday.

Tariq explained that earlier this year, PTC had secured an order to export cigarettes worth $20.5 million to Sudan, which would have provided Pakistan with valuable foreign exchange.

Despite support from the Special Investment Facilitation Council (SIFC) and endorsement from the Prime Minister, the deal fell through due to bureaucratic delays and opposition from anti-tobacco groups.

As a result, the contract was awarded to a neighboring country, leading to a significant economic loss for Pakistan. This incident highlights the need for more efficient decision-making processes to capitalize on such economic opportunities.

“Certain clauses of the World Health Organization’s Framework Convention on Tobacco Control (FCTC) were misinterpreted and used as the basis to challenge this export order,” Tariq explained.

“Ironically, the neighboring country that ultimately won the contract is also an FCTC signatory, like Pakistan and Sudan.

“This incident illustrates the harmful effects of misinformation and the economic harm that can arise from the unchecked influence of certain advocacy groups on public policy".

PTC officials informed the media that the legitimate tobacco industry in Pakistan is facing serious challenges due to the rise in illicit cigarette sales.

In the first quarter of this fiscal year, sales of legal cigarettes fell by nearly 0.8 billion sticks compared to the same period last year.

This drop shows how much illicit trade is hurting legal businesses and government revenues, which are crucial for funding important projects in Pakistan.

The economic impact of the rise in illicit cigarette sales is significant. The massive Federal Excise Duty increase of over 150% in February 2023 has harmed the legal sector, as higher prices have pushed consumers towards cheaper, illegal alternatives.

This has resulted in an estimated PKR 300 billion loss in government revenue, taking away funds that could have been used for public services and development projects.

PTC acknowledged and praised the Federal Board of Revenue (FBR) for its recent efforts against illicit tobacco trade but stressed that these efforts alone are not enough.

PTC strongly advocates for the full implementation of a Track & Trace system in all regions, including Azad Jammu & Kashmir (AJK). This system would help authorities monitor products, reduce tax evasion, and ensure that only legitimate products reach consumers.

The ongoing absence of a strong Track & Trace system remains a major obstacle in Pakistan's fight against illegal trade.