ISLAMABAD, May 7: Federal Minister for Commerce Jam Kamal Khan held a detailed meeting with a delegation led by Marco Mariotti, President CIS & Central Asia, Philip Morris International, to discuss key challenges facing Pakistan’s tobacco sector, including illicit trade, regulatory gaps, and export potential.
During the meeting, the delegation briefed the Minister on the growing scale of illicit cigarette trade in Pakistan, noting that a significant portion of the market remains undocumented, resulting in an estimated annual revenue loss of around Rs350 billion. It was highlighted that nearly 45 to 47 billion cigarettes are being sold without payment of taxes, creating an uneven playing field for the formal sector.
The discussion focused on structural issues in the tobacco supply chain, particularly the procurement of tobacco leaf, under-reporting of production, and weak traceability mechanisms. The delegation pointed out that although registered companies operate under strict regulatory frameworks, undocumented production and misuse of contracts enable informal players to access raw materials and expand illicit manufacturing.
Participants emphasized that the issue extends beyond taxation, with concerns relating to undocumented income, money laundering, and broader economic distortions. The Minister was informed that a limited number of actors benefit disproportionately from the undocumented segment, while formal businesses continue to face compliance and cost pressures.
A key theme of the meeting was the need for stronger enforcement. The delegation stressed that while laws, tax stamp systems, and regulations are already in place, their implementation remains inconsistent. It was noted that enforcement requires coordinated action by multiple institutions, including federal and provincial authorities.
The role of the Pakistan Tobacco Board (PTB) was also discussed. Participants highlighted that while the Board has regulatory functions such as crop estimation and price setting, its enforcement capacity is limited. The need for restructuring and strengthening the Board to play a more proactive role in documentation and monitoring was emphasized.
The meeting also reviewed policy challenges arising from Pakistan’s commitments under the International Monetary Fund programme, particularly regarding the gradual removal of import restrictions and equal treatment of commercial and industrial importers. While these reforms aim to liberalize trade, stakeholders noted that they may complicate efforts to control the supply of key inputs used in cigarette manufacturing.
Federal Minister Jam Kamal Khan acknowledged the complexity of the issue, describing it as a “multi-layered challenge” requiring a comprehensive approach from farm-level production to retail enforcement. He emphasized that the core problem lies in weak enforcement rather than absence of policy.
The Minister underscored the importance of aligning federal and provincial efforts, noting that effective regulation of tobacco cultivation and local markets requires active provincial involvement alongside federal agencies such as FBR and FIA.
He reiterated the government’s commitment to supporting the formal sector, promoting exports, and ensuring a fair and transparent business environment. He further directed that stakeholder proposals be consolidated into actionable recommendations, with a focus on strengthening enforcement mechanisms, improving traceability, and gradually reducing the size of the informal economy.
The meeting concluded with both sides agreeing to continue engagement and cooperation to address illicit trade.The Minister emphasized illicit trade controls through enhanced enforcement mechanisms by federal and privincial entities to unlock the sector’s export potential, while safeguarding government revenues and farmer incomes tgrougj better returns.
