TIRANA, Aug. 9 – Albania’s Competition Authority has launched an inquiry into a monopoly tobacco collection and exporting company following complaints by local farmers over cheap prices they are offered.
A preliminary probe by the watchdog has found farmers in the central Albanian Dumre area, Elbasan, the country’s main tobacco producer, are offered average prices of 220 lek (Euro 1.6)/kg, which is 60 percent lower compared to what farmers in Greece or Bulgaria are offered for the same quality of tobacco. The price offered for one kilo of tobacco is even lower compared to the average price of a cigarette pack in the local market.
Being the only company which collects domestically produced tobacco for export, Greek-owned Mika Korà§a company based in the southeastern city of Korà§a has a monopoly position in the Albanian tobacco market.
While the company’s monopoly position is not a result of legal barriers for other operators to enter the market, the Competition Authority says “the power this company has on setting purchase prices and lack of competition, hint there could be abuse of its dominant position.”
The watchdog says it will probe the company’s activity for the June 2015-May 2016 period. Under preliminary contracts, the company offers farmers the tobacco seeds and some technical assistance in the planting, harvesting and storage process.
Cheap prices and delays in payments by the Greek company have forced hundreds of traditional tobacco producers in the Dumre area in Elbasan to give up their traditional crop.
Once a huge tobacco producer under communism with several local brands, Albania has no tobacco manufacturing plants since more than a decade.
Domestic tobacco production during the past decade has ranged from 900 tonnes in 2007 to 3,000 tonnes in 2014.
Domestically produced tobacco hit a decade high of 3,000 tonnes in 2014, meeting 38 percent of the country’s needs, according to data published by Open Data research centre.
The record production which mainly comes from the northern Shkodra region and Elbasan in central Albania, allowed Albania to increase its exports to 1,730 tonnes, up from 1,515 tonnes in 2013 and a record high of 2,061 tonnes in 2007 for the past decade.
Kosovo, Greece and Libya are the main destinations of Albania’s tobacco exports.
Despite a sharp cut in tobacco imports during the past decade, consumption has only slightly dropped unveiling a shift to domestically produced cheaper tobacco as continuous hikes in excise rates have made imported cigarette prices unaffordable for thousands of smokers.
Tobacco consumption in 2014 is estimated at 4,486 tonnes, down from a peak level of 5,267 tonnes in 2013, and 4.167 tonnes in 2005.
Tobacco importers say there has been a shift toward hand-rolled unprocessed tobacco which is mainly sold on the black market and mostly produced in the mountain areas in the northern region of Shkodra and the central Albanian region of Elbasan.
Albania has one of Europe’s highest smoking rates, at about 40 percent with some 3,300 people a year are estimated to die of smoking-related diseases.
The Albanian government has regularly raised the excise rate on tobacco during the past few years but dropped plans for a new hike this year following a sharp decline in imports affecting government revenue.
Cigarette imports dropped to 2,478 tonnes in 2015, down from 2,968 tonnes in 2014 and a record high of 4,500 tonnes in 2010, giving rise to allegations of increased smuggling.
The excise rate on a 20-cigarette packs currently stands at 110 lek (€0.77) while retail prices for the most popular brands range from 200 lek to 300 lek (€1.4 to 2.1) per packet.
Albania currently allows tax free tobacco cultivation for personal use at a quantity of up to 25 kg. Every extra kilo undergoes excise rate of 4,400 leke/kg (Euro 32).
Albanians are estimated to spend more than 300 million euros on tobacco products every year.
