India: Cigarette Retailers Hike Prices

Source from:  The Times of India 02/23/2016

Anticipating a hike in excise duty on cigarettes in the budget on Monday, a section of retailers has started charging extra for popular brands of ITC, Godfrey Phillips and other tobacco manufacturers. Earlier this month, a WHO-sponsored study had suggested a steep hike in taxes on tobacco products.

A retailer here told TOI that there is no other option but to charge extra for cigarettes as supply has dropped from distributors' end. "For last two-three days, supply has gone down. We have to buy popular brands from the open market by paying extra, which we recoup from our customers," a retailer said.

Brands like Navy Cut, Gold Flake, Classic and Gold Flake Kings are being sold at a price that is higher than what is printed. The difference ranges from Rs 2 to Rs 7, depending on the price of the brand. A retailer in Park Street said that he has information that even a Navy Cut packet will be costlier by at least Rs 10 after the budget. "Perhaps this is the reason why distributors are not supplying according to our demand," he added.

Incidentally, taxes on cigarettes are usually based on the length. For filter cigarettes, the length varies from 69mm to 97mm. The most popular segments are 69, 74 and 84mm.

However, when contacted, ITC officials made it clear that there is no hike in cigarette prices. "There is no control of tobacco companies if a retailer takes a few extra bucks ahead of the budget," sources in the tobacco industry said. Incidentally, the Tobacco Institute of India (TII), the representative body of tobacco companies, had criticised the recommendation of the study sponsored by WHO, saying that it will give rise to illegal tobacco trade.

According to TII, over the last three and a half years, the incidence of central excise duty and state VAT on cigarettes, at a per unit level, has gone up cumulatively by 98% and 124% respectively. "This is exerting severe pressure on the legal cigarette industry even as the illegal cigarette trade grows unabated and the overall tobacco consumption continues to shift to cheaper non-cigarette tobacco forms. As a result of punitive taxation on cigarettes since 2012-13, the legal cigarette industry in India has dropped from 110 billion sticks in 2011-12 to 95 billion sticks in 2014-15 and is expected to drop further in the current year." Enditem