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ISLAMABAD, Sep 29 (APP):A recent study, conducted by a leading international firm, has stressed the need for additional corrective measures to curb the trade of smuggled cigarettes, which is causing significant losses to the national exchequer.
The report, compiled by Alvarez & Marsal (A&M) – a global professional services firm specialised in forensic analysis and business investigation, adopted a unique approach to measure Pakistan’s cigarette production capacity by tracking acetate tow, the key raw material used in cigarette manufacturing.
Launching the report on Monday, Global Head of Anti-Illicit Trade Policy at British American Tobacco (BAT) Nick Hodsman called for more targeted border enforcement and strict checks on misdeclaration of acetate tow imports, which would help bridging illicit cigarette trade gap.
According to the report, Pakistan imported enough acetate tow in 2023 to produce between 60 and 80 billion cigarettes. Of these, 39 billion sticks were manufactured by legitimate companies, including 2 billion exported sticks not subject to tax.
However, nearly 41 billion sticks were produced by non-duty-paid (DNP) manufacturers.
“The data shows a troubling mismatch between declared volumes and production potential,” Hodsman said, emphasizing how acetate tow served as a clear indicator of cigarette production capacity in the country.
In FY 2024-25, the report said, the government imposed an adjustable Federal Excise Duty (FED) of Rs 44,000/kg on acetate tow imports to tighten documentation in the cigarette sector, but it did not yield the required result.
Trade figures highlighted that acetate tow imports dropped sharply from 2.36 kilotons in 2023 to just 0.145 kilotons in FY 2024-25. During the same time period, availability of local DNP brands has not dropped, pointing towards increased smuggling of acetate tow to produce cigarettes.
The report said recent seizures by the FBR at the Sost border with China and the Torkham border with Afghanistan highlighted the emergence of new smuggling routes underscoring the scale of this growing problem as the imposition of increased FED has made acetate tow smuggling immensely lucrative.
Hodsman stressed that without targeted border enforcement at the borders as well as ensuring no misdeclaration of acetate tow, there was a risk of widening illicit trade gap, undermining government revenues, hurt legitimate businesses, and weaken the national economy.