Economy, Business And Markets

New Lease of Life for Tobacco Industry

New Lease of Life for Tobacco Industry
New Lease of Life for Tobacco Industry

The government has announced new measures to revive the tobacco industry that has long grappled with problems ranging from smuggling to monopoly, which have prevented competition and quality improvement.

On Saturday, the Central Taskforce to Combat the Smuggling of Goods and Foreign Currency said the government plans to have foreign cigarettes shipped to Iran carry printed codes so that they can be easily tracked by the authorities.

The taskforce’s secretary general, Abbas Nakhaei, told ISNA that the government bodies in charge of implementing the plan, including Tobacco Planning and Supervision Center and Electronic Commerce Development Center affiliated to the Ministry of Industries, Mining and Trade, are preparing the ground and the project will “hopefully” become operational by the end of the current Iranian year (March 19, 2016).

On Sunday, the ministry published a list of contraband cigarette brands, including prominent trademarks such as Marlboro and Camel, warning consumers about possible health risks involved.

Like many other industries such as textile, fuel and home appliances, the tobacco industry has long been a casualty of the arch-foe of Iran’s domestic manufacturing, i.e. rampant smuggling.

Smuggled products currently constitute up to 80% of Iran’s tobacco market while domestic cigarette production has declined over the past years. During the first half of the current Iranian year, cigarette production dropped 30% compared to last year’s corresponding period, according to Iranian Tobacco Company. Iranians smoke 62 billion cigarettes a year.

Until three years ago, ICT had the right to make tobacco-related decisions such as granting permits for tobacco cultivation. The company, at the same time, has monopolized the purchase of tobacco from farmers and domestic cigarette manufacturing.

Nevertheless, the tide has turned for the state-owned cigarette giant as the government granted the decision-making rights to the Industries Ministry’s Tobacco Planning and Supervision Center and ended ICT’s monopoly.

“Cancelation of ICT’s monopoly on the purchase of domestically cultivated tobacco on the one hand and permitting other manufacturers and exporters to purchase tobacco  on the other will lead to more favorable conditions for tobacco farmers,” the ministry’s news outlet SHATA quoted the head of the center, Ali Asghar Ramzi, as saying on Sunday.

The ministry’s data show that out of 30,000 tons of domestic demand for tobacco, 9,000 tons are produced in five provinces across the country. The northern Golestan Province is Iran’s top tobacco producer, accounting for 45% of the country’s overall output.

Ending reliance on tobacco imports, according to Ramzi, would be another favorable result of the government’s anti-monopoly policy, not to mention that the sector is gearing up for the presence of new manufacturers entering into joint ventures with foreign brands.

Japan Tobacco International, the international tobacco division of Japan Tobacco and a leading international tobacco product manufacturer, recently bought a privately-owned Iranian cigarette manufacturer Arian Tobacco Industry to reinforce its position as the market leader.

Croatian cigarette manufacturer TDR (Tobacco Factory Rovinj), which operates as a subsidiary of Adris Group, earlier announced the opening of a new factory in Sari, capital of Mazandaran Province, in partnership with ICT.

TDR’s investment in Iran is reportedly worth around €30 million, with the new factory having the capacity to produce 6 billion cigarettes a year.

Based on the targets set in the Fifth Five-Year Development Plan (2011-16), by the end of the current Iranian year, the country needs to domestically produce 10 billion cigarettes of international brands that are currently imported.

Cigarette imports, based on the Industries Ministry’s data, stood at 14 million last Iranian year (ended March 20, 2015), indicating a 40% increase over the previous year.

Ramzi attributed the fluctuating cigarette imports to unsteady domestic production and smuggling, estimating that imports are expected to rise further in the current Iranian year.

With foreign investments and joint ventures on the way, the government expects import figures to follow a downward trend as of the next Iranian year.