Daily Times

ISLAMABAD: International Tobacco Companies have forged vicious nexus to annihilate the local tobacco industry in Pakistan.

Planning is underway to cause immense harm to the local tobacco growers on the basis of false and concocted reports like Nelson report which is extremely biased and contrary to the facts.

On one hand national economy is being caused colossal loss under tax head by smuggling international brand cigarettes to Pakistan from Afghanistan and on the other side efforts are being employed overtly and covertly to establish monopoly of international tobacco companies in Pakistan.

Illicit cigarette trade accounts for nearly a quarter of the gross trade of the product causing an annual loss of Rs 24 billion to the national exchequer, says a research report.

Commenting on the workshop held in Islamabad the other day in the perspective of tobacco industry, two citizens Muhammad Rizwan and Muhammad Usman told Daily Times the workshop was solely aimed at destroying the local tobacco industry.

In Pakistan the prices of cigarettes are already at the lowest ebb as compared to world countries and now the international tobacco companies are hell bent upon stifling the local tobacco industry on the basis of false and biased Nelson report.

The foreign tobacco companies have set up their lobbies and they win the favor of FBR officers through these lobbies. They seek full -fledged support from commerce ministry as well. They cautioned if eyes are not opened to the negative fall- out of fabricated reports like Nelson then the local tobacco industry will receive a serious blow and the tobacco growers will be left at the mercy of international tobacco companies.

Brands including d Dunhill, Benson & Hedges, Pine, Marlboro etc are smuggled in Pakistan. As per 2010 World Health Organization (WHO) report brands smuggled into Pakistan fall into two types: international brands made by Big Tobacco firm internationally (such as Dunhill and Marlboro) and return cigarettes, typically from Afghanistan, which were first exported from Pakistan as a means of avoiding tax and then are smuggled back into Pakistan. As per the report, cigarettes were smuggled into Pakistan through Afghanistan, a fact known by British American Tobacco Kingdom and Exports (BATUKE) since the mid-1980s. In 1984, two documents by BATUKE and one by Singapore United Tobacco Limited (SUTUL), a Singapore manufacturer that supplied smuggled British American Tobacco (BAT) brands throughout Asia, assessed the status of smuggled brands into Pakistan.

The summary of the research found that smuggled brands, including State Express, B&H, Dunhill, Marlboro and Kent, were being smuggled into Pakistan over the Afghani border. BATUKE brands accounted for an estimated 40% to 50% of total smuggled brands. The report suspected that unmarked brands arriving in Afghanistan from SUTL were being passed into the Pakistan market through Torkham along the Khyber Pass, Baiur/Swat/Mingora and Parachinar.

An international memo of PTCL in 1984 was issued which asked BATUKE to withhold maximum stock of international brands, since the sales of local; brands was being harmed by international smuggled cigarettes.

BATUKE instead supplied transit brands to Afghanistan and allowed for local smuggling of cigarettes from Afghanistan ended up in Pakistan”. BATUKE employed the SUTL to make shipment to companies in Afghanistan. Due to such interventions, the general trade into Afghanistan from SUTL from December 1989 doubled from 64 million cigarettes to 112 million cigarettes compared with December 1988.

A BAT and a SUTL representative went to better understand the general trade market. In February 1992 they reported on their tour of four major general trade markets: Karachi, Quetta, Lahore and Rawalpindi. At each site, wholesale prices for smuggled cigarettes were recorded, along with the popularity of BAT cigarettes relative to competitors.

In Quetta, where cigarettes arrived from the Torghundi, Afghanistan via Kandahar, Chamman, BAT and SUTL representatives met with buyers and began negotiating with one in particular, identified as Hayatullah to become the sole agent of transit brands into Afghanistan and Pakistan.

Hayatullah guaranteed BAT a set annual sales volume, but would only accept shipments from SUTL and not Wesimex, a Dutch exporting company that also supplied the Afghan market. The BAT and SUTL representatives felt that having a sole supplier and agent for Afghanistan and Pakistan would allow for greater control of prices for transit brand and introduction of line extensions.

By June 1993, SUTL established an exclusive distribution agreement with Hayatullah, with the possibility of BAT discontinuing its relationship with Wesimex if Hayatullah proved “reliable and effective”. Through his company Hayatullah Bros, he was identified as the agent “who handles our business in Pakistan and Afghanistan” The Pakistan authorities need to be more prudent and active in order to prevent illicit trade of cigarettes, and impose duties and fines on the MNC whose products are sold in the Pakistani markets through the umbrella of local representatives – smugglers.

The FBR needs to immediately arrest this growing trend of cigarettes smuggling in Pakistan besides devising a system of imposing heavy penalties on the beneficiary companies, as it has been done in UK successfully.