Tea sits at the center of daily life in Pakistan, from roadside dhabas to drawing rooms. That cultural preference is reflected in complex numbers. Recent estimates suggest per capita tea consumption of around 1-1.2 kilograms per year, placing Pakistan among the world’s highest tea-consuming nations.
Total annual consumption has been estimated at 170,000-220,000 tons, and Pakistan consistently ranks among the top global tea importers. Almost all of this demand is met through imports, which means the country’s love of tea directly translates into a significant import bill and a primary source of revenue for the state.
Within this large, legitimate market, however, a substantial portion of trade has shifted into illegal channels, especially over the past decade. The core of the problem lies in the price gap between fully taxed, legally imported tea and untaxed or under-taxed tea entering Pakistan through smuggling routes. A study by the Competition Commission of Pakistan (CCP) on the tea market found that legally imported tea costs about 32 percent more than smuggled tea under the Afghan Transit Trade framework. With such a wide gap, legal importers and branded tea companies struggle to compete, while smuggled tea easily finds buyers in wholesale markets and retail shops.
The Afghan Transit Trade is a key conduit. Afghanistan, a much smaller and largely green-tea-drinking country, has at times imported nearly as much black tea as Pakistan, which is a black-tea-dominant market of more than 200 million people. Containers of black tea arrive at Karachi port declared as Afghan cargo, move inland under transit, and then a sizeable portion is quietly diverted back into Pakistani markets instead of reaching Afghan consumers. The CCP has explicitly recommended revisiting the Afghan Transit Trade Agreement to curb the selling of Afghanistan-bound tea inside Pakistan, pointing out the damage to both the legal industry and the public exchequer.
Although precise current volumes are hard to pin down, historical estimates show how large the illegal segment can be. An industry-backed analysis a decade ago suggested that about 112,000 tons of tea were being smuggled in a single fiscal year, implying a revenue loss of roughly Rs 8.7 billion on that quantity alone. When other non-duty-paid channels were included, total estimated losses climbed to around Rs 11 billion for that year. When set against total national consumption of just over 200,000 tons, this implied that roughly half the tea market could be supplied through illegal routes. More recent reporting points to similar patterns: for example, one analysis noted that smuggling of Kenyan black tea to Pakistan under Afghan transit jumped by well over 100 percent in 2022-23, while Pakistan’s own legal tea imports declined, a divergence strongly suggestive of an expanding illegal pipeline.
The damage goes beyond lost customs duty and sales tax. Legal packers, blenders, and distributors who comply with standards and packaging laws face chronic undercutting from untaxed tea that arrives at lower prices precisely because it avoids the full cost of legality. This shrinks formal sector margins, discourages investment in branding and quality, and threatens jobs along the formal supply chain. At the same time, the state forfeits stable revenue from a product with very inelastic demand: Pakistanis do not stop drinking tea when taxes change; they shift to lower-priced, often smuggled alternatives if those are available.
At the macro level, tea smuggling forms one strand in a much wider web of illegal trade that, according to independent research, costs Pakistan hundreds of billions of rupees in tax revenue each year across multiple product categories. For a country that repeatedly turns to external lenders and struggles with fiscal deficits, closing these leaks would relieve budgetary pressure and reduce the need for harsh, broad-based taxation elsewhere in the economy.
Policy responses have begun to take shape but remain incomplete. The CCP and the Pakistan Business Council have both urged the government to rationalize tariffs and sales tax on tea so that legal imports are not priced entirely out of the market, and to impose stricter controls and documentation requirements on Afghan transit cargo. Proposed steps include requiring Afghan traders to be properly registered for tax, collecting duties and taxes upfront with refunds routed only through Afghan authorities, and strengthening customs oversight on transit corridors to ensure that cargo declared for Afghanistan actually leaves Pakistani territory. Complementary enforcement inside Pakistan would involve targeted inspections of wholesale markets, documentation of supply chains, and penalties for retailers found selling non-duty-paid tea.
Ultimately, tea smuggling is not an abstract issue. It connects the everyday cup of chai served in homes and hotels to Pakistan’s broader struggle for economic stability. Closing the space for illegal tea trade through smarter taxation, tighter transit controls, and visible enforcement would protect honest businesses, safeguard revenue, and ensure that a drink so central to Pakistani life does not quietly undermine the country’s financial health.