News Articles
Tobacco industry seeks alternatives
by Veronica A. Hernandez
Managing Editor, Greenfields Magazine
THE tobacco industry in the Philippines is currently facing many challenges, especially after the government increased taxes on “sin products” like cigarettes.
It was in 2013 that the government started collecting more taxes from cigarettes with the passage of Republic Act No. 10351 or the New Sin Tax Reform Law.
RA 10351 increased the tax rates for tobacco and alcohol products, and the government expects to raise P248 billion in the next five years starting in 2013. For 2013, revenue collec¬tion was targeted to reach P33.96 billion out of which nearly 70 percent or P23.4 billion will come from tobacco. [The collection for tobacco has reached P67.06-B, which far exceeded govern¬ment targets. - ed.]
However, as to whether the tobacco industry is heading toward extinction remains to be seen, but based on latest reports, the net income of Philip Morris Fortune Tobacco Corp. (PMFTC) dur¬ing the first nine months of 2014 reached P462 million, which is a hefty drop from the P2.8 billion the company recorded in the same period last year. PMFTC blamed illicit trade in cigarettes for the drop in its net income, but the effects of the increased takes on tobacco product cannot be overlooked as a factor.
“This law will lead to the extinction of the tobacco industry,” Bernard Vicente, vice president of a local tobacco growers fed¬eration, said in an article “Is the tobacco industry headed for collapse?” that was published in The Philippine Star last year.
“Sales of cigarettes will drop drastically and will in turn bring down demand for tobacco by the cigarette manufacturers. They might even close shop,” he asserted.
Because of the effects of increased sin taxes on local ciga¬rette sales over the long term, the government is looking at al¬ternative uses for the locally grown tobacco plant, including the export market. Two possible uses for the tobacco plant show promise: dust and pulp.
Based on a study by the NTA, there is a huge potential for tobacco dust in the Philippines because fishpond areas nation¬wide would need 423 million kilos of tobacco dust for a year’s (two cycles) operation. About 250 million kilos of this volume would be used in Regions 3 and 6. Also, tobacco dust only needs the planting of ordinary tobacco plants and not the high-grade types that are suited for planting in the northern regions of the country.
Tobacco virgin pulp, which is derived from the plant’s stalks, can also be used for paper bag and commercial paper produc¬tion. The stalks are usually thrown away to rot after harvest.
Stable Production
Tobacco production in the Philippines, however, has remained stable and is even steadily increasing. NTA data showed that for tobacco season 2013-2014, the number of farmer cooperators planting tobacco increased to 56,920 tilling an aggregate area of 39,505 hectares.
“This is a 2.6% increase and about 3.8% bigger, in number and area, respectively, over the previous year’s number of farm¬ers at 55,000 with an aggregate area of tobacco farms at 38,041 hectares,” the NTA said in a press release.
Also, tobacco production for crop year 2012-2013 increased to 67.66 million kilograms, which was valued at P4.46 billion.
The volume is 4.45 percent bigger than the previous year’s production of 64.78 million kilograms.
With the stable production base, the local tobacco indus¬try, exports of unmanufactured and finished tobacco prod¬ucts are being sustained by the country.
Based on NTA statistics, 50 percent of the country’s ex¬ports of unmanufactured and finished tobacco products are exported and have nearly doubled from 2010 to 2013.
In 2010, exports of unmanufactured products reached P60.25 million while it was P143.58 million for manufac¬tured tobacco products, for a total of P203.83 million.
In 2013, the value of unmanufactured tobacco product ex¬ports reached P162.55 million, while it was P214.89 million for finished products, for a total of P377.45 million.
The top five countries for the country’s unmanufactured tobacco product exports are the United States, Puerto Rico, Indonesia, Singapore, and Belgium.
Meanwhile, the top five destinations for manufactured to¬bacco products are Thailand, US, Vietnam, Korea, and Ma¬laysia.
Although the sin tax law can result to lowered sales of fin¬ished tobacco products in the country, the NTA believes that the increasing value of tobacco exports and alternative uses for the tobacco plant like pulp and dust will keep tobacco farmers busy in the next years to come. (Reprinted from Greenfields Magazine Issue 377, December 2014)
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Veronica Hernandez of Greenfields magazine (1st from right, front row) visited the poultry farm of a tobacco farmer in Marozo, Narvacan, Ilocos Sur, for magazine coverage on the tobacco industry, last November 6. She was assisted by NTA Candon Branch Manager Estrella de Peralta (3rd from right, front row) and branch extension workers during her round in Ilocos Sur. Tobacco farmers, like Virginia Supnet and son Michael (right photo), are now contracted by the agency as poultry growers for its AgriPinoy Tobacco Farmers Food Processing and Trading Center. |
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