ISLAMABAD: The government is set to amend the Tobacco Marketing Control Rules, 2016 and Martial Law Order (MLO) 487 of 1985 to eliminate the concept of Weighted Average Price (WAP) used in determining the Minimum Indicative Price (MIP) of tobacco, well-informed sources told Business Recorder.
The Ministry of National Food Security and Research (MoNFS&R) recently briefed the Cabinet Committee for Disposal of Legislative Cases (CCLC) that the Pakistan Tobacco Board (PTB) is a statutory body established in 1968 through an ordinance to promote tobacco cultivation, regulate marketing, and encourage exports of tobacco and tobacco products.
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The ministry informed the committee that the existing legal framework—comprising the PTB Ordinance 1968, Tobacco Marketing Rules 2016, and MLO 487—provides for two pricing mechanisms: Minimum Indicative Price (MIP) and Weighted Average Price (WAP). However, the Cabinet Committee on Regulatory Reforms (CCoRR) had directed the PTB to abolish WAP, a decision subsequently ratified by the federal cabinet.
Under the current system, WAP is paid for the initial quantity of tobacco procured by the industry at the beginning of the crop year, while any surplus quantity is purchased at the lower MIP. In practice, WAP has remained significantly higher than MIP.
The ministry further explained that Section 8 of the PTB Ordinance 1968 provides for price fixation but does not clearly define the mechanism for determining MIP. The process is only broadly referenced in PTB Bye-Laws 1985, which link it to the determination of cost of production (CoP).
In practice, Cost of Production Committees are constituted to assess CoP, after which the Price and Grade Revision Committee (PGRC) — comprising growers, industry representatives, and provincial agriculture officials—reviews key variables such as inflation, markup, and profit margins to recommend MIP. Final approval is obtained from the Economic Coordination Committee (ECC).
The ministry pointed out that the concept of WAP was introduced through subordinate legislation — the 2016 Rules and MLO 487 — despite having no basis in the parent PTB Ordinance 1968, creating a legal inconsistency.
Highlighting the financial implications, the ministry presented calculations for the 2024-25 crop year for flue-cured Virginia (FCV) tobacco. The MIP was derived at Rs542.23 per kg based on CoP (Rs425.22/kg), markup (Rs19.91/kg), inflation (Rs74.83/kg), and profit (Rs22.26/kg), with the PGRC recommending Rs545/kg.
However, the WAP for the same period stood at Rs719/kg. This meant growers received Rs719/kg for the initial quota and Rs545/kg for surplus quantities, resulting in an additional Rs174/kg over the MIP.
As a result, growers earned an effective return of 26.41 percent under MIP, which increased to 67.33 percent when WAP was applied. While this practice benefitted farmers, the ministry warned that it adversely affected the international competitiveness of Pakistan’s tobacco and created distortions, as such high returns are not available in other sectors of the economy.
In light of the cabinet’s decision to abolish WAP, the ministry proposed amendments to the Tobacco Marketing Control Rules through a Statutory Regulatory Order (SRO), while changes to MLO 487 would be made through a legislative amendment. A draft bill, vetted by the Law and Justice Division, has been prepared.
The summary, submitted under Rule 14(a) of the Rules of Business 1973, was considered by the CCLC in its meeting held on March 16, 2026, which approved the proposed amendments.
Copyright Business Recorder, 2026
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