By Timothy S. Donahue
Top Takeaways:
Tax clarification: Pakistan Tobacco Company said cigarette taxes target manufacturers, not tobacco farmers.
Illegal market warning: PTC says illicit operators are disrupting payments and destabilizing the leaf market.
Export pressure: Pakistan’s tobacco exports reportedly fell nearly 30% in value in early 2026.
Pakistan’s tobacco sector is feeling the squeeze, and legal manufacturers say illicit trade is tightening the squeeze.
Pakistan Tobacco Company pushed back this week against claims that cigarette taxation is directly hurting tobacco growers, arguing instead that illegal cigarette operators and market oversupply pose the biggest risks to farmers.
“Taxes were imposed on cigarette-manufacturing companies, not on tobacco farmers,” said Hamza Amir Khan, regulatory affairs manager at PTC, during a meeting with stakeholders and media.
The comments come as Pakistan’s tobacco sector faces mounting pressure from declining exports, oversupply, and a rapidly growing illicit cigarette market, issues that have become increasingly central to industry discussions across South Asia.
PTC said its grower relationships remain tied to long-term purchase commitments. According to Khan, the company purchased all contracted tobacco and, during recent surplus seasons, bought additional leaf in accordance with directives from the Pakistan Tobacco Board.
But demand conditions have deteriorated. Khan linked the slowdown to surplus inventories, elevated domestic leaf prices relative to international markets, and the expansion of tax-evading cigarette manufacturers.
“Several illegal companies have failed to make timely payments to farmers, while others either delay procurement or refuse purchases despite issuing contracts,” he said.
The illicit market has become an increasing concern for Pakistan’s legal tobacco sector, with manufacturers arguing that untaxed cigarette sales are eroding government revenue and destabilizing the supply chain for growers. PTC said that each billion cigarettes sold legally contributes roughly Rs560 million to Khyber Pakhtunkhwa province through Pakistan’s revenue-sharing system.
At the same time, export conditions have deteriorated. Citing data from Pakistan’s Ministry of Commerce, Khan said the country’s tobacco exports fell 29.5% in value in the first quarter of the current year, further pressuring an already strained market.
Pakistan remains an important tobacco-producing country, particularly for flue-cured Virginia, with the sector supporting thousands of growers and rural jobs. But like many emerging tobacco markets, it is increasingly caught between higher taxation, growing illicit trade, and shifting global demand.
