The dispute about fixation of tobacco crop price has been resolved as all stakeholders have agreed to abide by the price fixed by the Pakistan Tobacco Board (PTB) ie, Rs 121 per kilogram for selling of the crop to protect the growers’ interests.
Industry sources told Business Recorder here on Friday that the key issue was whether the PTB had followed due process of law while taking the decision to notify minimum price of tobacco crop at Rs 121 per kg, below which no one could buy tobacco.
Different government organisations and stakeholders looked at the matter in-depth. These included officers of the Ministry of Commerce and parliamentary committees including Senate Standing Committee on Commerce. It has been found that the PTB followed all the relevant rules and procedures while determining the minimum price of tobacco.
The issue was also raised for protecting interests of tobacco farmers hence its price was discussed at length. It was, however, pointed out that in the last two years exports of tobacco has increased by 300 percent. The export is increasing because price of Pakistani crop is competitive in international market. The export is helping farmers as they are able to earn livelihood not only through domestic sales but also through export. In such a scenario if price of tobacco crop is increased beyond the international market, it would lead to lesser export and hurt interests of farmers, apart from reducing foreign exchange earnings.
Currently the price of tobacco crop in Bangladesh is Rs 106 per kilogram. The minimum price of Pakistan tobacco crop is Rs 121 per kilogram, whereas the market price is nearly Rs 140 per kilogram. Any further price increase would jeopardise chances of earning through export.
Sources say that tobacco is the only crop in Pakistan for which price is fixed through law. This special price-increase mechanism is unique for any crop in Pakistan and is aimed at protecting farmers from the threat of crop prices going down. In the last five years the prices of tobacco crop had increased 100 percent. If the price increased any further, domestic demand for the crop would also decrease, thereby hurting the interests of the farmers.
More than Rs 75 billion is annually generated by Government through taxes on cigarette manufacturers. Even a small amount of taxes could go a long way in helping farmers and reduce their cost of production through subsidy and thus increase their income. Experts said that Pakistan Tobacco Board only determine and fix the minimum price of tobacco crop not its maximum or market price. Hence, Rs 121 is only the minimum price of tobacco crop below which no one can buy tobacco. The current market price is around Rs 140 per kilogram, depending on quality of the crop. In some cases, the price even goes beyond Rs: 145 per kilogram. Hence, the interests of farmers were well protected by the legal mechanism put in place.
It was also pointed out that the very fact that more farmers had grown tobacco in 2011, as compared to previous year indicated that the farmers were happy with the price of crop in the market. Thousands of farmers grow more than 100 million kilograms of tobacco crop in Pakistan which generates income of more than Rs 11-12 billion.