Cigarette Output Down 27.9%, Smuggling Up 97.5%

EghtesadOnline: A total of 6.07 billion cigarettes were produced in the first two months of the current Iranian year (March 20-May 20), indicating a 27.9% decline compared with the year before.

News ID: ۷۵۰۶۱۱

04 August 2020

The Ministry of Industries, Mining and Trade estimates that 4.76 billion cigarettes were smuggled into Iran, registering a year-on-year surge of 97.51% given the 10.83 billion cigarettes smoked in the country during the two-month period, ISNA reported.

It is worth noting that cigarette import to Iran has been banned for a long time now.

In early July, Mohammad Reza Tajdar, the head of Tobacco Products Importers and Exporters Association, said, “Due to complications associated with the provision of foreign currency from the so-called secondary FX market, known by its Persian name Nima, to import cigarette raw materials, seven cigarette and tobacco factories have suspended their operations and the remaining enterprises are working at 50% of their capacity; only one is operating at 70% of its capacity.”

The Central Bank of Iran has recently changed the import category of raw materials of cigarette from Group II to Group III, suggesting that importers have to meet their forex requirements from exporters who are not required to offer their forex earnings on the secondary FX market rather than those who have to offer their earnings on the market like exporters of non-oil products (petrochemicals, steel and minerals).

Noting that Iran’s tobacco industry, which employs 50,000 people, needs imported raw materials worth €300 million annually to stay afloat, Tajdar said, “Imports account for 70% of the raw materials needed by the industry. Unless CBI allows provision of forex from the export earnings traded through Nima, the share of contraband cigarettes from the market is bound to increase from 20-50%. Cigarette is not a necessity good, no question about that, but it is consumed by 12 million people in the country, which makes it an essential item.”

A total of 54.8 billion cigarettes were produced in the last fiscal year (March 2019-20), indicating a 13.7% growth compared with the year before.

Cigarette exports saw a 2.7% increase to stand at 154 million while the ban on imports remained in effect.

Notably, Jordan and Austria made to the list of Iran’s export destinations for cigarettes for the first time in the year ending March 2020, according to Ataollah Maroufkhani, the head of Industries, Mining and Trade Ministry’s affiliate, the Iranian Tobacco Planning and Supervision Center.

The ministry estimates that 10.03 billion cigarettes were smuggled into the country in the last fiscal year, given the 65 billion cigarettes that were smoked in the country during the period, which registered a year-on-year decline of 39.2%.

Tobacco exports stood at 2,374 tons, posting a surge of 161.3% while 21 cigarette and 39 tobacco factories were active last year compared with 20 cigarette and 33 operational tobacco factories in the year before, ISNA reported.

The government earned 17,023 billion rials ($73 million) from tax on cigarette consumption in the year ending March 2020, indicating a 50% rise compared with last year, Fars News Agency reported.

Tax on cigarette sales increased by 22.8% to reach 7,868 billion rials ($33.8 million) last year compared with 6,406 billion rials ($27.5 million) in the fiscal 2018-19.