ECC Orders Tobacco Deregulation Plan in 3 Months
Tobacco deregulation moved a step closer after Pakistan’s economic managers directed the Ministry of National Food Security to devise a plan within three months to end the federal government’s role in fixing tobacco prices. The Economic Coordination Committee (ECC) agreed that an exit strategy from price fixation was the need of the hour.
The ECC agreed with the price fixing proposal approved by the Pakistan Tobacco Board (PTB), and stressed that the food security ministry must now work out how the government can step back from setting tobacco prices.
ECC sets a three-month deadline
The food security ministry said the subject had been deferred before while missing prerequisites were met. Section 8 of the PTB Ordinance, 1968 requires fixation of the maximum price, so any exit needs a legal and practical plan.
The ECC discussed how minimum indicative prices (MIPs) for tobacco are set, using the formula approved by the PTB. The FBR chairman drew the forum’s attention to a basic problem: tobacco production is high while local consumption is low, so the exportable surplus should also be discussed to help farmers avoid losses.
A summary on the 2026 minimum indicative price and revised cess rates for 2026-27 had been presented to the ECC on September 7, 2026. The committee deferred it and asked the ministry for a justified case and a workable deregulation strategy.
How tobacco prices are fixed
The PTB promotes the cultivation, manufacturing and export of tobacco and tobacco products. Minimum indicative prices for different grades of tobacco are notified by the federal government under Section 8(1) of the PTB Ordinance, 1968.
The ministry set out the key questions: why the 2026 MIP fell against 2025, why White Patta and Rustica cost more while other types fell, and why types showed different trends year to year.
The maximum price is the cost of production plus average inflation over the eight cropping months, January to August of the previous year, plus a fixed 5 per cent profit margin. The Price and Grade Revision Committee meets in November or December, so the previous crop year’s inflation is used.
For 2026, Flue-Cured Virginia (plain) tobacco cost Rs473.61 per kg to produce. With 5.43 per cent inflation, the MIP came to Rs523 per kg. The PTB noted in a May 5, 2026 letter that August 2026 inflation was 9.26 per cent, against 5.43 per cent a year earlier; at that rate the MIP would be Rs541.14 per kg.
Why growers face losses
The ministry proposed keeping the 2025 MIPs and cess rates for the 2026 crop, and submitted a proposal for deregulation of the PTB. The ECC approved it and directed the food ministry to present a deregulation plan within three months.
The decision matters for growers in Khyber-Pakhtunkhwa and Punjab, where tobacco is a cash crop. The Peshawar High Court has already ruled that excise duty cannot apply to hand-stemmed tobacco, setting aside a demand of Rs123.992 million against Royal Tobacco. Enforcement is also in focus: suspects snatched back seized cigarettes from an FBR team in Bahawalpur, showing how hard the illicit trade is to police. With short-term inflation past 12 per cent and the trade deficit at $14.6 billion, growers face rising costs on every side.
What tobacco deregulation would change
If the plan works, the government would stop fixing tobacco prices and let the market decide what growers are paid. The PTB would shift from price setting towards promotion, exports and research. Growers would gain from prices that reflect real costs, but lose the safety of a notified minimum. The three-month plan will show which side of that bargain the ministry chooses.
What is the minimum indicative price of tobacco?
The minimum indicative price is the lowest price the government notifies for a grade of tobacco. It is the cost of production plus average inflation and a fixed 5 per cent profit margin. For Flue-Cured Virginia (plain) in 2026, it was Rs523 per kg.
What is the Pakistan Tobacco Board?
The Pakistan Tobacco Board promotes the cultivation, manufacturing and export of tobacco and tobacco products. The government notifies minimum indicative prices under Section 8(1) of the PTB Ordinance, 1968.
Why does the government fix tobacco prices?
Section 8 of the Pakistan Tobacco Board Ordinance, 1968 requires the fixation of the maximum price. The ECC now wants an exit strategy so the government can step back from price fixing.
When will the deregulation plan be ready?
The ECC has directed the Ministry of National Food Security to present a proposal for deregulation of the price mechanism within three months.
