Tussle over tobacco pricing
THE two-member committee set up by the federal ministry of food security and research to look into tobacco prices, assess its present cost of production and recommend new rates if necessary, has presented its report.
But with the Pakistan Tobacco Board (PTB) terming the exercise unauthorised, tobacco companies resisting increase in minimum price (MP), the federal ministry of commerce has yet to decide whether to approve a new rate or retain the earlier minimum price. And with the tobacco purchase season to start early in July, tobacco growers are losing hope and patience.
They have filed suits in the court, are planning agitation, and intend to besiege tobacco purchase centres if the recommendations of the committee are not implemented before the start of the purchasing season.
The committee, led by Dr Muhammad Sharif, DG National Agriculture Research Council, formed after the growers had rejected the PTB committee report on tobacco’s cost of production (CoP) and MP and demanded increasing the price to Rs200/kg citing the skyrocketing prices of inputs. The committee also ruled against the PTB’s cost of production report while assessing it at Rs159.5/kg and suggested raising tobacco MP to Rs183.4/kg from Rs117/kg, earlier recommended by the PTB for the year 2012-13.
Later, Federal Crop Commissioner Dr Muahmmad Aslam Gil, who had also signed/notified the earlier PTB’s committee report, signed the Sharif report and notified the new CoP and price.
The growers welcomed the decision but the tobacco companies and the PTB questioned the report and its recommendations, though on separate grounds.
Abbas Khan Afridi, Minister of State for MoC, convened a meeting of all stakeholders on June 18 to discuss the issue but it remained inconclusive as growers and tobacco companies stuck to their stands. Mr Afridi then decided to talk to stakeholders separately to reach consensus decision on tobacco CoP and prices.
The PTB opposed the Sharif committee COP assessment exercise as unauthorised. “The assessment of tobacco COP and fixation of MP is the sole prerogative of the PTB under the PTB Ordinance 1968 and the MLO 487.
These have already been announced by a recognised/notified committee comprising representatives of tobacco growers, PTB members, representatives of Agriculture Policy Institute and national and multinational companies and PTB officials,” said an official of the PTB on condition of anonymity.
When asked, the official said the MoC would handle and decide the issue of new tobacco price ultimately as it was authorised under the law but he said that as Dr Aslam had also notified the new and earlier price, one wondered which one of his orders would be implemented.
“The growers are emotional, they should have approached the PTB, which is the relevant forum and should have pointed out any flaws/mistakes in the process of COP assessment and calculation by the PTB notified committee. All the members of the committee would have satisfied them on oath that no irregularity whatsoever had been committed in the process,” added the official.
Farmers allege the PTB is hands in glove with powerful tobacco companies and is not safeguarding the interests of growers. The official, however, rejected the allegation and said the PTB had safeguarded the interest of growers but it was also duty bound to take care of the interests of other stakeholders –the tobacco companies and dealers.
“The PTB is an organisation which is widely criticised by all for nothing,” he said. The approval of new price could lead to another situation. “What if the tobacco companies decide tomorrow not to purchase tobacco from growers? Can they be forced to buy it,” the official asked.
A grower responded by saying tobacco companies would necessarily purchase the crop directly or indirectly through middlemen as they have done in the past.
Liaqat Yousafzai, the Kashtkar Coordination Council general secretary, said the MoC meeting on June 18 remained inconclusive as the PTB and tobacco companies, especially the multinational ones, resisted approval of the new price.
“However, in case tobacco companies started purchasing tobacco before the approval of the new price, they won’t allow that.
We would besiege the purchase centres until our demands are accepted. We have challenged the delay in approval of CoP and the price recommended by the Sharif committee through two petitions in the Peshawar High Court. We are also forming a farmers’ volunteer movement in Swabi for a long struggle and have so far enlisted 500 farmers’ volunteers. We are also mobilising political support,” he said.
“Growers have every right to be paid a price considering its prices last year, inflation and global tobacco price trends and increases in prices of other crops and agriculture inputs and our profit margin,” he added.
Around 80,000 families in KP are depend on tobacco production and tobacco-companies buy around 85 million kg of tobacco from growers in KP. At Rs104/kg price last year, the rural economy of the militancy-hit KP is estimated to have pocketed revenues of around Rs12 billion which may go up to Rs18bn this year if the new price is implemented.
However, according to industry, any big raise in price will render the local cigarettes uncompetitive; encourage cheaper illegal foreign brands and lead tax to evasion This will ultimately hit the farmers as foreign brands will crowd out the local products.
Farmers say tobacco production could be increased to 300mn/kg annually and KP could earn billions more if export of tobacco is allowed from the province, and growers are encouraged through subsidised inputs, soft loans and crop insurance facilities.