PAKHTUNKHWA.PK

Virginia flue-cured tobacco is the main cash crop of small farmers of district Swabi, Mardan, Charsadda, Malakand, Buner and Mansehra, producing between 65 to 75 million kg of world-class tobacco for the last 60 years. Federal Govt is the main beneficiary of this crop because it is annually getting Rs. 42-45 billion as central excise duty which forms 70% of the price of cigarettes, while the tobacco board is getting in the shape of cress more than Rs. 40 million and the provincial government more than Rs. 150 million. Appr. 10% of production is exported, which earns valuable foreign exchange for the country. The main multinational purchasers of tobacco in Pakistani market is Philip Morris of USA under the name of Lakson Tobacco Co., and British-American Tobacco (BAT) under the name of Pakistan Tobacco Co. In addition to this, about a dozen of small companies purchase about 6% of the overall production.

The cultivation of tobacco, once exceeding 85 million kg, over the years has decreased and presently it is the main stray of small farmers due to two reasons:

1. Shrinking of profit margin i.e. low prices offered by purchasing companies.
2. High labor requirement for the crop. It is not worthwhile for the farmers to grow tobacco, which actually requires labor of several family members, while those family members may earn higher wages working at the construction sites in Islamabad, Lahore or Karachi.

The cost of production of tobacco for the year 2009, estimated by Anjuman-e-Kashtkaran Tobacco NWFP, was Rs. 146,5  per kg, which was formally brought to the notice of the Chairman Pakistan Tobacco Board in various meetings as well as representation to the Federal Commerce Ministry, the Chairman of the Senate and the Speaker of the National Assembly. Consequently, the standing committee of the Senate on agriculture visited Peshawar twice on the issue of tobacco prices before the commencement of the purchase season and held two intensive meetings in Peshawar and one in Islamabad with the stakeholders i.e. the Chairman of Pakistan Tobacco Board, Secretary of the Ministry of Commerce, representatives of the tobacco companies and presidents of the farmers’ associations i.e. Anjuman-e-Kashtkaran Tobacco NWFP, Kissan Board, Anjuman-e-Kashtkaran Zamindaran and Sarhad Chamber of Agriculture. After due deliberations the chairman of the Standing committee of Senate recommended to the Pakistan Tobacco Board to fix the purchase rate of Rs. 150 per kg, which, unfortunately, was not implemented and farmers had to suffer losses.

In the current year i.e. 2010, the highest price notified by the Pakistan Tobacco Board is Rs. 98 per kg, which is obviously less than the cost of production, but due to less than expected production of tobacco, the tobacco companies have been buying at the higher  are of Rs. 114 per kg, which clearly proves that the price notified by the Pakistan Tobacco Board is unrealistic, while the cost of production in the current year has gone up by 10 % due to inflation and is app. Rs. 165 per kg, therefore, even higher than the notified rate is not going to cover their cost of production, but the fact is that small farmers having an acre or two of land are only earning their daily wages from this crop.

Although the potential for growing about 300 million kg of tobacco exists in Khyber Pukhtoonkwa, which can theoretically earn USD 537.5 million annually from the export of tobacco, but the actual results remain dismal. The figure of USD 537.5 comes into picture if we take into account the average price for a kg of tobacco in our neighbor India – USD 2.5 per kg in the current year 2010, minus domestic consumption – 85 million kg and multiply remaining 215 million kg by USD 2.5 ( pages 9-10 of attached quarterly report of International Tobacco Growers’ Association)

Apart from losing substantially by growing tobacco the small farmers of Khyber Pukhtoonkhwa have, due to current floods, lost 70% of their crop as the middle leaf, which is considered to be the best tobacco, was just being collected and sold. Hence, the loss of standing crop in stagnant water and floods makes the farmers look up to the Federal Government and tobacco companies to compensate them for their losses according to the proportions of benefit that they have been deriving from this crop i.e. Federal Government since 1950 -  app. Rs. 2000 billion, while the companies – appr. Rs. 625 billion, which is a matter of record archived in the Ministry of Commerce at Islamabad.

In the current season the approximate expected production of tobacco was 64 million kg. The average price paid to the farmers this season is about Rs. 100 per kg. Due to heavy floods about 70% of tobacco crop was destroyed, which means that farmers have suffered loss of appr. Rs. 4400 million, which needs to be compensated by the Federal Government and tobacco companies. If the compensation is not paid, the scenes of farmers blocking Islamabad-Peshawar motorway, which the province has already witnessed during the flood, can be expected again.