Undocumented procurement of cigarette raw material causing huge losses

LAHORE: The undocumented procurement of acetate tow, a critical raw material used in cigarette manufacturing, has surged since the imposition of an adjustable Federal Excise Duty (FED) of PKR 44,000 per kilogram on acetate tow imports.

Recent trade data revealed that acetate tow imports dropped by 53 percent, declining from 6,892,637 kg in 2023 to 3,673,671 kg in 2025. This significant decline of 3,218,966 kg in documented imports, at a time when cigarette production has remained stable at 60–80 billion sticks per year, strongly indicated a substantial increase in undocumented or smuggled supplies. As a result, the national exchequer has been deprived of approximately Rs 300 billion in adjustable tax revenue.

The contraction in documented imports signals a clear shift towards undocumented channels and demands a targeted audit and enforcement response from the relevant authorities, said an industry expert.

According to him, this trend has created a deeply uneven playing field for the formal industry, where compliance with documented imports, declared production, and tax obligations has become increasingly difficult to sustain. The widespread tax evasion, coupled with the sale of cigarettes below the government’s minimum retail price, has already pushed the legal industry’s market share below 50 percent, significantly undermining tax collection and contributing to revenue losses exceeding Rs 300 billion.

The expert urged authorities to strengthen enforcement through rigorous analysis of trade and import data, emphasising the urgent need for stricter audits and tighter monitoring mechanisms to curb revenue leakage and bring the sector fully into the documented economy.

Copyright Business Recorder, 2026