Eastern Company to present feasibility study to parliament to approve tobacco cultivation

Mohamed Ahmed
3 Min Read
In Egypt, there are about 15 million smokers, more than half are in the countryside, and the rate is expected to increase to 16 million (Photo by Laurence Underhill\DNE)

Eastern Company SAE intends to present a feasibility study on tobacco cultivation in Egypt to the House of Representatives for approval, as part of the company’s efforts to provide tobacco locally rather than bearing the high costs for its import, according to chairperson Mohammed Osman.

The company decided to take this step after facing difficulties importing tobacco in the past period due to the foreign currency shortage in the market.

The company’s specialised committees have completed feasibility studies related to tobacco cultivation, and have begun to look for sites in the desert that could be suitable for cultivating tobacco for the Egyptian market, the chairperson said.

The company presented a feasibility study to the House of Representatives this fiscal quarter—the parliament’s approval is considered a significant step before addressing the Egyptian Armed Forces and the Ministry of Agriculture to allow the company to cultivate tobacco.

The foreign currency shortage and obstacles in the entry and exit of funds into the Egyptian market have pushed cigarette manufacturers in Egypt to cut their production. Foreign companies that produce cigarettes across the Eastern Company production lines reduced their production volume by roughly 50%.

The company targets to supply EGP 42bn  to the state’s treasury this fiscal year to be considered the largest supplier of the public treasury. Last fiscal year, it supplied EGP 34.9bn, indicating a prospective growth of 20%,

The company’s production capacity is currently 260m cigarettes a day–95m from Eastern Company products and 65m in foreign companies’ products, including Philip Morris.

Eastern Company acquires 71% of the domestic market, 24% goes to Philip Morris, and the remaining 5% is spread across three foreign companies.

The Ministry of Finance obtained EGP 1.6bn last month from the cigarette tax, which will be transferred to the General Authority for Health Insurance. A tax of EGP 0.5 is imposed on each box of cigarettes rather than the former EGP 0.1.

A source at Eastern Company said the company will address the Public Tax Authority to reconsider the imposition of a unified tax value of EGP 0.5 per box on all cigarette types. The company suggests that the tax should be applied gradually from popular to medium-range and then luxurious cigarettes.

The source added that the company tried to communicate with Finance Ministry officials to change the tax value for health insurance, as [the company deems it] unreasonable to unify that value across all kinds of cigarettes, whether popular or medium-range or luxurious cigarettes.

The company intends to address the Public Tax Authority to reconsider the value for social justice, taking into account the social trait.

The Ministry of Finance targets to allocate EGP 3bn from cigarette taxes this fiscal year to the Health Insurance Authority.

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