Karachi, April 2, 2024 – Zafar Mahmood, Chairman of the Pakistan Tobacco Company (PTC), has projected a significant loss of Rs 300 billion in tax revenue due to the prevalence of non-duty paid (NDP) cigarettes during the current fiscal year 2023-24.
In his review of the annual report of the Pakistan Tobacco Company (PTC), Mahmood emphasized that the illicit sector, fueled by substantial excise increases, continues to pose a serious threat to the legitimate tax-paying industry.
“Despite a 1.5 times increase in excise in February 2023, the Minimum Legal Price (MLP) only rose by 80 percent. This disparity has granted an unfair advantage to the illicit sector, which sells cheap tax-evaded brands. While the Track and Trace System (T&TS) initiative was introduced by the Government of Pakistan to ensure rightful contributions to the National Exchequer, its effectiveness has been hindered by inadequate enforcement across the industry,” Mahmood stated.
The rise of NDP products is anticipated to lead to a loss of approximately Rs 300 billion in tax revenue for the fiscal year 2023-24. Mahmood highlighted that volatile macroeconomic factors further threaten the sustainability of the manufacturing sector.
He stressed that timely and consistent intervention by relevant government authorities is crucial for business sustainability and the safety of employments associated with the legitimate industry.
While striving to meet consumer needs, PTC’s overarching vision remains “A Better Tomorrow.” The company has diversified into the vaping category by launching BAT Group’s global brand, VUSETM. Additionally, VELO remains at the forefront of PTC’s tobacco harm reduction agenda, reaching 450 thousand consumers nationwide. PTC has also focused on its “Made in Pakistan” exports initiatives, generating valuable foreign currency inflows by exporting products worth $48 million during the year.
PTC continues to prioritize investment in the development of its dynamic and diverse talent pool, fostering confidence in their capabilities to drive the business forward. With resolute leadership and steadfast endurance, PTC remains dedicated to delivering sustainable growth and value for all its stakeholders.
The year posed a unique array of macroeconomic challenges for the industry. Central Bank foreign exchange reserves hit a historic low, resulting in a 24% currency devaluation, while inflation reached a record 30.9% for the calendar year.
These challenges were compounded by industry-specific headwinds, such as severe leaf crop shortages and an excise increase of almost 200% during fiscal year 2022/23, leading to a widening price gap between the legitimate industry and NDP manufacturers.
Despite these obstacles, PTC continued its journey to enhance value for its stakeholders. The company grew within the legitimate sector by 1.5 percent, achieving its highest-ever share of 80 percent. Additionally, it delivered an EPS growth of 35.8 percent.
PTC accelerated its efforts towards the vision of “A Better Tomorrow,” resulting in a volume growth of VELO by 31% in 2023 compared to the previous year. Furthermore, PTC expanded its New Categories portfolio with the launch of its vaping category, VUSETM, in Pakistan. The company’s contribution towards the National Exchequer also increased by 48.9% to PKR 229.2 billion in the form of various duties and taxes.
