Tax Policies Distort India's Products Market

Source from:  Tobacco Reporter 01/25/2010

In releasing its results for the quarter to the end of December, ITC said that a relentless focus by its cigarette division on providing world-class products to consumers had sustained its leadership position in the industry. "Innovation and consumer centricity have enabled the business to deliver superior value through its brand portfolio of well crafted blends, contemporary packaging styles and use of state-of-the-art manufacturing technology," the company said in a note posted on its website. "On the manufacturing front, investments are being progressed towards enhancement of quality, productivity and variety." "Similarly, focussed initiatives have commenced to strengthen the trade and distribution channels." There were no volume figures available in the note and one headline declared that "non-cigarette FMCG (fast moving consumer goods) segment registers robust revenue growth at 24 per cent". Overall, ITC said, it had delivered an impressive performance for the quarter with net profit growing by 27 per cent on that of the previous year to reach Rs11,440 million. Pre-tax profit, at Rs17,010 million, was up by 28 per cent, driven by "handsome growth" in the non-cigarette FMCG, Agri- and Paperboard & Packaging businesses. "Improved product mix, smart sourcing in the face of commodity inflation and intensive cost management actions contributed to this sizeable growth in bottom line," the note said. "Whilst the FMCG and Paperboard & Packaging segments grew handsomely in net revenues led by growth in volumes, revenue growth in the Agri-business was driven by both volume and improved realisations." "While the performance of the Hotels business has improved sequentially, it is still caught in the throes of a weak recovery momentum." In respect of its cigarette business, ITC spoke of the "disparate imposition of graphic health warnings on tobacco products" that had provided a fillip to the growth of the contraband trade. It said that the upward revision of VAT rates on cigarettes in certain states was an increasing cause of concern. A uniform levy was critical to prevent an unhealthy tax rate "war" and the consequent trade diversion amongst States and Union Territories. And it spoke of the vacuum that had been created by the exit of the popular low priced micros and plain non-filter cigarettes in the wake of the heavy imposition of excise duties last year - a vacuum that had been occupied by "duty-evaded illegal regular size filter cigarettes". Enditem