PTC vows to ensure transparency in tobacco leaf buying process
While briefing journalists during visit to tobacco leaf buying areas on Wednesday, Head of Leaf PTC, Imad Uddin told that the tobacco industry is operating under the oversight of the Pakistan Tobacco Board (PTB) and the industry is regulated by the PTB Ordinance, 1968, which governs production targets, procurement quotas, and fair market practices.
As per the MLO 487, every year, the PTB allocates tobacco buying quotas to manufacturers based on their declared requirements, which are publicly notified to ensure transparency. This year the total demand from all the tobacco companies was around 81.5 million kilograms with 25 percent share of the Pakistan tobacco company. However, the total crop production is nearly 140 million kilograms.
In case of surplus production, the PTB ensures proportional allocation among companies, safeguarding farmer interests. The MLO 487, or Martial Law Order 487, is a tobacco marketing law in Pakistan that regulates the purchase of tobacco by companies from growers. It requires companies to purchase surplus tobacco at or above the set Minimum Indicative Prices (MIP). This law is part of a broader framework including the Pakistan Tobacco Board (PTB) Ordinance, 1968 and the Tobacco Marketing Control Rules, 2016.
Imad Uddin further informed that, Pakistan Tobacco Company directly contracts with more than 10,000 farmers, and through almost 150 technical experts, provides technical training and agronomic support from seed sowing to harvest, ensuring responsible sourcing and quality enhancement. The PTC also provides financial assistance to farmers in terms of loans. Recently the PTC provided more than one billion rupees in terms of financial assistance to tobacco farmers in the region. Under this model, contracted farmers receive priority during buying, guaranteeing income security and promoting compliance with both local and international standards.
'Tobacco is called as a cash crop and directly manage more than US$ 65million economic activity and our commitment to farmers goes beyond procurement—we invest in their training, ensure guaranteed purchase of quality leaf, and create a sustainable livelihood model. Farmers remain at the heart of our business, Imad further stated.
Addressing misconceptions around the Advance Federal Excise Duty (FED) imposed by the federal government at Green Leaf Threshing (GLT) units, the PTC clarified that this levy, currently set at PKR 390 per kilogram, is borne entirely by manufacturers and does not affect farmers in any way.
'The narrative that the advance FED hurts farmers is misleading and deliberately propagated by illicit trade operators to undermine tax enforcement,' the PTC official added. 'Farmers sell their green leaf to manufacturers; any tax applied after this point is strictly the manufacturer's responsibility.'
There are only around 13 GLTs in Pakistan, all fully traceable, making them the most logical taxation choke point. In contrast, there are over 450,000 retail outlets selling cigarettes and more than 50 cigarette factories – primarily in Khyber Pakhtunkhwa (KPK) and Azad Jammu & Kashmir (AJK) – where enforcement at post-processing levels is far more challenging.
The FED at GLTs, fully traceable processing units—is a key tax enforcement mechanism designed to curb revenue leakage and illicit cigarette manufacturing. By documenting actual volumes processed by manufacturers, the system ensures declared production aligns with tax liabilities, strengthening the national economy.
Unprecedented excise increase in recent years on the legitimate cigarette manufacturing companies and too low advance FED in previous years has led to the illicit sector to grow to more than 56% of the market. This increase has been fueled by smuggled cigarette brands.
FBR needs to analyze how much tobacco was processed at GLTs and how much adjustable FED was collected from cigarette manufacturers and how much of this adjustable FED was actually adjusted against the final liability. FBR also needs to check how the GLT processing corresponds with the leaf buying of these manufacturers.
The PTC remains fully compliant with the laws and regulation relevant to tobacco industry, aligning its operations with PTB directives and global best practices.
'Maintaining a fair and transparent supply chain is essential for Pakistan's economic stability. The advance FED is a crucial tool to protect government revenue and discourage tax evasion, which ultimately benefits legitimate farmers and the wider economy.'
Copyright Business Recorder, 2025
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