The Economic Coordination Committee (ECC) of the Cabinet has directed the Ministry of National Food Security and Research to formulate a plan to transition from the current practice of setting Minimum Indicative Prices (MIPs) for tobacco crops to a system based on open market pricing.
According to a news report, the decision was made following a meeting of the ECC, during which the Ministry of National Food Security and Research briefed the committee on the Pakistan Tobacco Board (PTB) to regulate, control, and promote the tobacco industry, including its export. The PTB has been responsible for setting MIPs for various types of tobacco since its inception.
Under Section 8(1) of the PTB Ordinance, the federal government has been required to notify the MIPs for different grades of tobacco. These are not support prices but represent the minimum threshold at which tobacco companies purchase tobacco from farmers. The MIPs are based on the Cost of Production (CoP), determined by a committee formed under the PTB’s by-laws.
As per the report, the ECC discussed the need to shift away from this system in line with the government’s broader policy to move towards open market pricing, which is determined by supply and demand forces. The committee highlighted that the current practice, while providing support in case of surplus production, could potentially reduce cess collection if open market prices surpass the MIPs.
During the meeting, the ECC approved the revised MIPs for the 2025-26 fiscal year and directed the Ministry to devise a comprehensive plan for transitioning to a system based on open market prices.Â
This plan will be presented to the ECC for further review and approval. The proposed changes are expected to impact the cess collection from tobacco, with an estimated increase of approximately Rs. 222.81 million in 2025-26 due to the proposed enhancement in cess rates.
