ISLAMABAD: Industry sources have rejected claims by certain NGOs that the government will collect PKR 285 billion in revenue from the cigarette sector in fiscal year 2024–25, calling the figure unrealistic and not based on factual analysis.
According to officials and financial analysts, the actual revenue is more likely to hover around PKR 250 billion. This projection includes anticipated adjustments in June related to advance tax payments—a factor often overlooked in inflated estimates.
A key driver of the anticipated shortfall is the excessive Federal Excise Duty (FED) imposed on acetate tow, a crucial raw material used in cigarette manufacturing. While the industry had proposed an adjustable FED of PKR 4,000 per kilogram to curb illicit trade and enhance documentation, the government instead imposed a rate of PKR 44,000 per kilogram—an elevenfold increase.
This sharp hike has backfired, making smuggling significantly more profitable and pushing more players into the illegal trade. The scale of the problem is evident in the record seizures by law enforcement, which have already confiscated 447 metric tons of smuggled acetate tow in 2025—enough to produce nearly seven billion illicit cigarettes. This represents a major blow to the documented industry and a substantial loss to the national exchequer.
In a bid to crack down on illicit trade, the government recently introduced an ordinance authorizing provincial law enforcement agencies to take enforcement action against illegal cigarette operations. However, a formal notification required to implement this measure has yet to be issued, leaving enforcement efforts stalled.
Observers warn that this delay risks allowing illegal trade to expand further, eroding government revenues and undermining legitimate businesses. With the fiscal year nearing its end, policymakers are under increasing pressure to address regulatory inefficiencies and enforcement delays to protect vital revenue streams and ensure a fair competitive environment within the cigarette industry.
