Illicit Tobacco Trade Booms as Pakistan Struggles with Track & Trace System Rollout

In Pakistan, the success of Track & Trace will depend upon the implementation of the system in its true letter and spirit across the board coupled with a sustained enforcement drive.

This was stated by BAT Group’s Asia Pacific, Middle East and Africa (WEST), Area Head of Legal & External Affairs, Mona Iskandarani here on Tuesday during a media briefing session on the efficacy of the Track and Trace System in the tobacco sector, organized by the Pakistan Tobacco Company (PTC) here at a local hotel.

During the session, the representatives of the PTC, shed light on the implementation status of Track & Trace in Pakistan and highlighted that delay in implementation and enforcement across the board was causing significant loss of volume for the legitimate industry.

Ms. Mona added, “In order to ensure that the quantum of illicit trade is controlled within the country, it must be coupled with strong enforcement and fiscal measures”. “We acknowledge the recent enforcement initiatives undertaken by the Federal Board of Revenue (FBR) in Pakistan but we need sustained enforcement efforts across the supply chain to curb the menace of illicit cigarette trade in Pakistan,” she concluded.

Mr. Asad Shah, Director Legal & External Affairs pointed out that Track & Trace has been implemented in various countries in one form or the other, but the system does not offer a silver bullet solution to fight illicit trade, and only serves as a tool to facilitate law enforcement agencies to carry out raids and seizures of tax evaded products.

While talking to the participants, Mr. Shah apprised that despite a lapse of 15 months since the implementation deadline, only 2 out of over 40 cigarette manufacturers have implemented Track & Trace in true letter and spirit. The incidence of illicit trade has only grown ever since the implementation of a Track & Trace System whereas it was supposed to reduce duty and tax evasion in the tobacco sector.

Participants were also informed that since the implementation of Track & Trace in Pakistan, i.e. 1st July 2022, illicit sector will grow from approximately 37% in FY 2021/22 to approximately 63% by the end of FY 2023/24.

The illicit manufacturers are openly flouting laws by using counterfeit stamps, by placing stamps over the polypropylene wrapping on a pack of cigarettes. Some players are even applying stamps on cigarette packs manually, which defeats the whole purpose of a Track & Trace System in Pakistan, which is to monitor production volumes. Illicit cigarette packs without a Graphical Health Warning and without Track & Trace stamps are being sold in the market openly.

Majority of Duty Not Paid (DNP) cigarettes are being manufactured in AJK and strict enforcement measures need to be taken at entry and exit points of AJK to ensure that no tax evaded cigarettes make their way into the country.