Sri Lankans pay more for cigarettes compared to Asian peers

By Nuzla Rizkiya 

Sri Lankans pay considerably more for cigarettes than many of its Asian neighbours when adjusted for purchasing power, research by JB Securities showed. 

“This discrepancy not only affects the consumers but could also impact the stock performance for the companies in the tobacco sector,” it said.  

Sri Lankan cigarette consumers are effectively paying around 78 percent of the total cost of a cigarette, purely in taxes, the research highlighted. 

The majority of this tax burden comes from excise duties, which have placed the cigarette prices in Sri Lanka among the highest in Asia, when adjusted for purchasing power. 

The industry in Sri Lanka is dominated by British American Tobacco Company, holding 84.13 percent of the shares in Ceylon Tobacco Company PLC (CTC), which is the main corporate body of the sector, controlling 99 percent of the local market. 

According to CTC, the tobacco industry in Sri Lanka is one of the most heavily regulated sectors in the world. 

Almost 100 percent of the tobacco used for manufacturing is cultivated locally and Sri Lanka is globally recognised for producing premium quality tobacco, the Sri Lanka’s Export Development Board noted.

Moreover, the tobacco products market in Sri Lanka is projected to generate a revenue of US $ 1,012 million in 2024, with cigarettes alone accounting for US $ 995.3 million.

The local industry is expected to grow at a compound annual growth rate (CAGR) of 5.84 percent from 2024 to 2029 and there will be a noticeable shift in demand for flavoured cigarettes, particularly among the younger population. 

However, Sri Lanka’s market remains significantly small compared to global leaders such as China, projected to generate US $ 298,500 million in tobacco revenue in 2024.