The announcement of farm support prices usually creates a buzz in the circle of economy watchers in Pakistan, but tobacco failed to create one, despite a 20 percent increase in the commoditys support price to Rs98/kilogram.
Bear in mind, however, this increase is way below the proposed support price of Rs150/kg for FY10 crop by the Senate body, which creates doubts on the seriousness of the government to discourage tobacco consumption in the country.
Farmers complain that their cost of producing tobacco leaves it at par with the latest support prices which offers them no incentive to utilize their land for tobacco production. Many farmers have hinted on sowing alternative cash season crops that offer better returns, which signals that the government production target of 96 million kilograms of tobacco is highly optimistic. The love lost with tobacco can also be traced by the massive 41 percent decline in area used for tobacco cultivation during the ongoing decade.
Pakistani smokers, nevertheless, will have to face another wave of cigarette price increase - the previous one being the recent hike of 20 to 50 percent in FY09 following the imposition of higher duties on cigarette sales.
But so what? Call them iron men if you would like, Pakistani smokers have shown high levels of immunity to previous instances of price hikes as evident by 19 percent increase in the revenue of listed tobacco firms in the year so far - in tandem with 9 percent growth in cigarette consumption in 2009, according to the WHO.
What this cigarette price hike could do at best is force brand switching among medium and low-end consumers. But the tobacco companies need not worry about that as they have all their bases covered by catering all income group segments.
Interestingly, however, Pakistan has a rather unwanted distinction of being the 7th largest tobacco consuming country in the world with a staggering per capita cigarette consumption of 400 as every third Pakistani smokes, according to FOA. The fools - as they say, are usually on the other end of a cigarette -z- waste roughly around Rs162 billion (or $1.9 billion more than what Kerry Lugar bill would give us) every year on smoking.
Now this is a serious sum of money for a country, where people cry poverty, hunger and food insecurity 24/7. Just to give an idea, the money wasted in smoking can be used for 32 kgs of additional wheat for every Pakistani each year.
The demographic shift resulting in large number of youth also means more smokers in the queue as youth ranging between the age of 16 and 34 is the fastest growing smokers segment in the country, according to the WHO. What needs to be done? Probably nothing much - as 15 to 20 percent price hike won trigger a massive withdrawal from smoking. Had Senates proposal been accepted, the results might have been better.
The officials probably need to take a leaf out of Indias book where the per capita cigarette consumption is three times lower than Pakistans. How they have managed it, requires a look into their model - maybe somebody is the health ministry is listening if they want to achieve the Millennium Development Goals in the next five years.