Tobacco occupies an uneasy place in Pakistan's political economy: it is a cash crop for some 75,000 farming households concentrated in Khyber Pakhtunkhwa, the raw material for a multibillion-rupee cigarette industry dominated by two multinationals, and simultaneously the focus of intensifying public-health regulation.[1] Together, leaf growing, primary processing and cigarette manufacturing contribute less than 1percent to GDP, yet the Federal Board of Revenue routinely counts on cigarettes for 10–12percent of excise receipts, revenue that has shaped policy just as surely as WHO advice and civil-society pressure.
During the 1990s, rampant smuggling of duty-free "transit" brands and large-scale domestic tax evasion eroded government revenue and PTC's market share. Company memoranda from the period show BAT lobbying Islamabad both for stricter excise enforcement and against the full liberalisation of imports.[3] Tighter oversight followed the Prohibition of Smoking and Protection of Non-Smokers Health Ordinance 2002, and soon followed by ratification of the WHO Framework Convention on Tobacco Control (FCTC) in November 2004, committing the state to higher excise duties, pictorial warnings and smoke-free spaces.[4][5]
Flue-cured Virginia grown in Swabi, Charsadda and Mardan accounts for roughly four-fifths of leaf output; dark air-cured and rustica varieties supply Naswar and Hookah blends. The Pakistan Tobacco Board set the approved procurement quota for crop year 2025 at 74.8millionkg, down 14percent in two seasons, a cut that triggered farmer protests over "late and arbitrary" announcements.[8]
At the factory gate, the Quantum Index of Manufacturing shows tobacco manufacturing adding 0.39 percentage-points to large-scale manufacturing (LSM) growth in November 2024, even as overall LSM remained negative.[9] Separate PBS data put cigarette output at 15.4billion sticks in July–November FY 2024-25, up 30.8percent year-on-year.[10]
Regulation and taxation
Pakistan ratified the WHO FCTC in 2004, but its first comprehensive domestic law remains the 2002 Ordinance, which bans most forms of advertising, restricts sales to minors and empowers health authorities to set pictorial warnings.[4] Enforcement tightened after a 2014 statutory regulatory order; a Philip Morris court challenge was withdrawn in 2016, allowing a near-total advertising ban to stand.[11]
Pictorial health warnings were expanded in stages, from 40percent of the front panel in 2010 to 60percent in 2019, amid industry lobbying that stalled the originally proposed 85percent coverage.[12]
Fiscal policy relies on a two-tier Federal Excise Duty (FED). The 2023 emergency mini-budget raised the upper-tier rate to PKR 16,500 per 1,000 sticks; the Finance Act 2024 left rates unchanged but lifted the lower-tier price threshold to PKR 12,500, a move critics say created head-room for manufacturers to raise prices without paying more tax.[13] Provinces have begun imposing their own levies on raw leaf: Khyber Pakhtunkhwa’s 2024 Act introduced a cess of PKR 50 per kg, cut to PKR 25 after growers blockaded the provincial assembly.[14]
Advertising and promotion
Before 2002, cigarette brands sponsored cricket, cinema commercials and radio music programmes; BAT's "Explore the World" and Benson & Hedges' "Golden Tones" campaigns targeted urban males under 30.[3]
As of 2025, advertising is prohibited, but brand stretching through social-media influencers, point-of-sale lighting and hospitality events remains a compliance headache for regulators, who have limited federal inspectors nationwide.[3]
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