Illicit cigarette market share falls to 48pc amid enforcement drive

ISLAMABAD, Nov 11 (APP): Pakistan’s legitimate cigarette market expanded by around five billion sticks during FY2025-26, accompanied by a Rs45 billion increase in tax revenue and a decline in the estimated share of illicit trade from 54 to 48 per cent, after the government’s strengthened enforcement measures against illegal tobacco products started yielding the required results.

The legitimate cigarette market grew from approximately 36.5 billion sticks to 41.5 billion sticks during the fiscal year, indicating a significant shift towards the tax-paying sector and strengthening the contribution of compliant manufacturers to the national exchequer.

During a media briefing on a recently launched report titled “Illicit Tobacco Trade in Asia-Pacific: Taxation, Market Incentives, and Macroeconomic Costs,” here on Wednesday Senior Fiscal Engagement Manager at Pakistan Tobacco Company (PTC) Mohammad Ranjha said tax revenues from the cigarette sector increased from approximately Rs284 billion to Rs329 billion during the period.

Around 95 per cent of the additional tax contribution from legitimate manufacturers, he said, came from the two established legal manufacturers, while the remaining five per cent was contributed by other market participants.

Ranjha said the improvement coincided with the government’s continued focus on curbing illicit tobacco trade through legislative, regulatory and enforcement measures aimed at ensuring a level playing field for tax-compliant businesses and protecting public revenue.

These measures, he said, included electronic monitoring of green leaf threshing (GLT), enhanced monitoring of tobacco movement from GLT facilities, deployment of law enforcement agencies and expanded powers for provincial authorities to take action against illicit cigarette manufacturing and distribution.

Enforcement operations also resulted in the confiscation of substantial quantities of tobacco, cigarette paper, acetate tow, smuggled and duty-not-paid cigarettes, besides the sealing of 14 factories.

Industry data recorded 675 tobacco-related raids during 2026, indicating an intensified enforcement drive against illegal activities in the sector.
However, effective prosecution and timely judicial outcomes remain important to ensure that enforcement actions translate into sustainable deterrence against illicit trade.

“The progress achieved demonstrates what coordinated action against illicit tobacco can deliver. The next critical step is to ensure that successful raids translate into effective prosecutions and timely legal outcomes,” said Ranjha.

PTC acknowledged the government’s sustained efforts to address illicit tobacco trade and stressed the importance of strengthening coordination among enforcement agencies, prosecution authorities and the judicial system to ensure effective legal proceedings against offenders.

Ranjha said illicit tobacco trade resulted in estimated annual revenue losses of $14.85 billion across the economies covered by the study.
Pakistan’s estimated annual fiscal leakage stands at approximately $1 billion, highlighting the importance of sustained action to protect legitimate market share and strengthen revenue collection.

The report had estimated Pakistan’s illicit cigarette market share at 54 per cent, with foregone revenue equivalent to approximately 117.4 per cent of tobacco tax collected. Recent industry estimates indicate that the share has subsequently declined to around 48 per cent.

Industry estimates suggest that every one billion cigarette sticks shifting from the illicit to the legitimate market could generate approximately Rs7 billion in additional government revenue.

The legitimate industry emphasized that consistent enforcement, effective prosecution and balanced, predictable fiscal policies would be essential to sustaining the gains, expanding the legitimate market and ensuring a fair and competitive business environment for compliant manufacturers.