Rs415 Billion Lost to Illicit Cigarette Trade: A Growing Crisis in Pakistan

Pakistan is facing a growing tobacco crisis, with recent reports revealing that the country is losing an estimated Rs415 billion every year due to the widespread sale of illicit cigarettes. These untaxed and unregulated products now make up over 54% of the market, posing serious challenges for the economy and public health system.

The situation has become so alarming that experts are calling it a national emergency, urging authorities to take immediate steps to curb the illegal trade that is weakening the government’s tax base and damaging the local manufacturing industry.

According to data shared in the report, more than half of all cigarettes sold in Pakistan are illegal—manufactured without government oversight and sold without paying taxes. These cigarettes are often sold at prices much lower than the legal minimum, making them easily accessible, especially to the youth.

While two multinational companies that operate legally contributed around Rs270 billion in taxes last year, their market share has declined as illegal producers continue to grow unchecked. This has created an imbalance where law-abiding companies are penalized, and those operating outside the system are rewarded.

Fawad Khan, spokesperson for Mustehkam Pakistan, a policy group working on economic reform, said,

“It’s shocking that law-abiding companies are shrinking, while rule-breakers are expanding. This is not just a threat to public health, but also to the country’s economy.”

Legal cigarette companies in Pakistan are required to follow strict health, tax, and advertising regulations. These include printing pictorial warnings on packs, tracking their production with government-monitored systems, and paying high federal excise duties.

In contrast, many illicit brands skip these obligations. They avoid taxes, operate under fake or hidden names, and sell their products below the minimum price set by law. Despite this, enforcement actions by government agencies such as the Federal Board of Revenue (FBR) have largely focused on legal businesses—leaving illegal ones to grow.

Observers argue this creates a perverse incentive: follow the law and struggle to survive, or break it and profit.

Adding to the controversy is the role of certain international health organizations. Groups such as the Campaign for Tobacco-Free Kids and Vital Strategies have been accused of ignoring the issue of illegal tobacco sales while focusing their campaigns against the regulated sector.

Recently, these organizations were told by Pakistan’s government to halt operations, allegedly due to failure to comply with local registration and funding laws.

This raises concerns about whether global health efforts are being used to unfairly pressure licensed companies, instead of addressing the broader public health threat posed by the illicit trade.

The economic impact of the illegal cigarette trade is massive. The Rs415 billion in lost taxes could be used to fund vital sectors like education, healthcare, and infrastructure. With Pakistan facing rising debt and IMF requirements for higher revenue, experts argue the country cannot afford to let this issue continue unchecked.

At the same time, the sale of illegal cigarettes increases health risks, especially since these products often come without warnings, quality controls, or safety measures. Cheaper prices also encourage early-age smoking, further burdening the healthcare system in the long run.

Experts are calling for a balanced and targeted enforcement approach. Rather than punishing companies that comply with laws, the government must focus on shutting down illegal manufacturers, enforcing minimum pricing laws, and ensuring all cigarette producers are part of the track-and-trace tax system.

Unless strong and fair action is taken, the illegal cigarette market will continue to grow, eating away at national revenue and making it harder for legal industries to compete.

The tobacco crisis is no longer just a health issue—it has become a full-blown economic and governance challenge that Pakistan can no longer afford to ignore.