Islamabad - Pakistan is losing billions of rupees in annual excise revenue due to large scale and organised smuggling of internationally popular cigarette brands into Pakistan via Afghanistan.

A report by Tobacco Farmers Welfare Association (TFWA) estimates an annual loss in revenue of more than Rs24 billion due to illicit cigarette trade. The use of smuggled brands like Benson & Hedges, Dunhill, Marlboro, Pine etc. is increasing among Pakistani youth. And while big tobacco firms continue to augment their revenues, Pakistan is suffering major economic losses.

These smuggled brands are wreaking havoc on the Pakistani economy and can easily be identified as they are being sold in the market without any pictorial health warning and do not have ‘Made in Pakistan’ stamp on them, which is mandatory by Pakistani law, or these brands will have warnings in foreign languages.

As per the Framework Alliance Report of 2010, a WHO associate, smuggled cigarettes are sold in the Pakistani markets as a means of entering closed or high tax-levied markets. These smuggled brands are sold at rates as low as Rs20 to as high as Rs160.

As per the report, the tobacco smuggling network operates under the Afghan Transit Trade (ATT) Agreement, which was signed between the landlocked country of Afghanistan and Pakistan in 1965 with a view to provide Afghanistan port access. As per the agreement, goods bound for Afghanistan are allowed to be transported from the ports of Karachi and Bin Qasim to Afghanistan via the northern border towns of Torkham in KP and Chaman in Balochistan.

This facility provided to Afghanistan is being misused as the goods destined for Afghanistan are either pilfered inside Pakistan or are smuggled back into the country after reaching Torkham or Spin Boldak in Afghanistan.

In 1996, the Pakistani government had banned the import of tobacco along with 16 other items to Afghanistan under the ATT; however, as per agreed customs procedures under the 1965 agreement, goods declared by an Afghan importer as being for transit to Afghanistan, are not checked or verified at the Karachi port. Other than that, there is no scanning facility available at the ports that can thoroughly check large containers carrying transit goods worth billions of rupees. As stated in the Frameworks Alliance Report of 2010, there are reports of goods being pilfered before they cross over into Afghanistan.

Customs officials in Pakistan are of the view that measures taken by them such as comprehensive field paper work, sealing of consigned goods, shipment of transit goods in special railway wagons and checking shipment invoices at several points eliminate chances for en route diversions.

But this is a fact that despite elaborate procedures, en route smuggling under the ATT is not inconsequential.

These smuggled brands, mostly of popular foreign tobacco companies, like British American Tobacco (BAT) and Phillip Morris International (PMI), are sold in Karkhano, the main market and the nerve center of contraband trade, situated in the west of Peshawar.

Most foreign cigarettes brands are sold in Karkhano Market. Reportedly, the tobacco companies also influence the regulation of supply and demand in their favour.

As per the report of Framework Alliance, “The overproduction of tobacco, systematically promoted by tobacco companies, leads to competition among growers. The growers with small land holdings get sidelined and are forced to sell their crop at lower prices due to pressure from multi-national corporations (MNCs).”

The report also cites a formal letter by Anjuman-e- Kashtkaran Tobacco (the growers body) in KP, accusing the regulatory body of favouring the tobacco companies while fixing prices and dealing with other matters.

Already Pakistani farmers receive extremely less amounts in South Asia for their best quality crop due to monopolistic character of MNC.

The Report also raises the question that whether the proceeds from cigarette smuggling are funding terrorism in Pakistan.

It states that smuggling involves middlemen who ensure safe and timely delivery of goods at an agreed location. Middlemen bear the responsibility for bribing officials or any mafia that may come in the way of transportation.

It is anticipated that fees for protection and passage reach militants who control the smuggling routes. The Torkham-Peshawar route in Khyber Agency was reportedly controlled by a banned militant organization, Lashkar -e-Islam’s Mangal Bagh, who would charge a passage fee for goods passing through its territory.

Now the route is controlled by law-enforcement agencies. But protection money also needs to be paid to a local warlord along the Spin Boldak-Chaman route.

UNODC estimates that the Taliban armed opposition group has generated annual revenue between $200 million and $300 million through a ‘surcharge’ levied on the illicit drug trade.