Pictorial health warning condition on cigarette packs feared to boost smuggling

LAHORE: Government’s condition imposed on local cigarette manufactures to increase use of pictorial health warnings on their packets may open the floodgates for the smuggled brands, enjoying no such restriction, in Pakistan, industry sources said.
In February 2015, the Ministry of National Health Services, Regulations and Coordination announced an increase of pictorial health warning to 85 percent, which was to be implemented by March 30, 2015, from 40 percent earlier. “The requirement will most likely be met with an increased regulatory avoidance behavior,” said an industry official. “This will only provide incentives for smugglers and further increase the availability of smuggled cigarettes.”
The industry officials said previously it was mandatory for local brands to keep 40 percent of a packet with pictorial health warning.
The requirement was raised to up to 85 percent as per a convention of the World Health Organization (WHO), they added.
A ministry official said a committee, constituted by the finance minister and headed by the health minister, decided in July that every year a 10 percent increase in pictorial health warning will be mandatory.
The official said that it was also decided that a survey will be conducted to analyse effectiveness of an increase in the size of pictorial health warning in bringing down the smoking incidence after three years.
The official added that the implementation decision has still to be executed as the health ministry is working to formulate a concrete mechanism for the enforcement of the decision.
Industry sources feared that the increasing pictorial health warning might bite the revenue generated from the federal excise duty on tobacco sale as the sales of the legitimate tobacco would decline consequently.
They said when the health ministry stipulated at least 40 percent packaging with pictorial warning back in September 2010, the demand of the smuggled Korean cigarette brands in Pakistan surged manifold.
An official document showed that the Federal Board of Revenue lost taxes equal to one billion dollars to illegal sale of cigarettes over the last five years.
The sources said even the 40 percent pictorial health warning had virtually no impact on a cut in smoking rates.
A research report released by a UK-based auditor KPMG said smoking rates in Pakistan dropped merely 0.2 percent over the last five years.
The report said Pakistani consumers smoke 1.6 billion illegal cigarettes every month, which rendered an alarming tax revenue loss of Rs80 billion in the last five years. Alone last year, the loss on this account amounted Rs25 billion.
Another research report, issued by AC Nielsen said illegal cigarettes account for 23.7 percent of Pakistan’s total cigarette market. That means nearly one out of every four cigarettes is smuggled and counterfeit.
In 2014, 3.4 billion cigarette packets, which did not bear the prescribed pictorial health warning, were smuggled into the country through the porous borders of Afghanistan and Iran.
Such brands are easily and widely available across the country. Reports from WHO and Canadian Cancer Society concurred that there is no requirement to print any health warning on cigarette packs in Afghanistan.
Afghanistan is known to be a transit country for many smuggled products into Pakistan.
The total market size of cigarettes in Afghanistan is one-tenth of that of Pakistan. Even China does not require any pictorial health warning.