Cigarette prices of certain brands soar as companies halt production

The 20s pack of premium King size brands like Gold Flake and Classic have already shot up from Rs 246 to Rs 260-270

As cigarette manufacturers shut operations seeking clarity over the government's directive for bigger health warnings on packets, prices of certain brands have risen between 6 and 25 per cent.

Retailers said although stocks were available with distributors, these were not enough to keep up with demand. Since they were buying at higher prices from wholesalers retailers said they were charging more from consumers.

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“There is a scarcity of stocks with most of  distributors and wholesalers,” said Mohammed Hussein, a wholesaler in Kolkata. Another distributor said he was supplying less to retailers. “Stocks will deplete if we supply according to demand,” he added.

Asked about the stocks situation, an ITC spokesperson said, "Adequate stocks are available in the market. Retailers are prohibited by law from charging above the MRP. If they overcharge, they are liable to be prosecuted."

ITC, Godfrey-Philips India and VST under the aegis of the Tobacco Institute of India decided to halt cigarette production last Friday citing ambiguity over health warnings for tobacco products.

Cigarettes, comprising 11 per cent of the total tobacco consumed in India, are a major revenue contributor  and the industry is suffering an estimated loss of Rs 350 crore a day. Shares of ITC dipped by 1.5 per cent to Rs 330.95 and Godfrey-Philips India fell 4.16 per cent to close at Rs 1,143.05.

“People associated with the trade have been hit hard. The tobacco industry employs over 45 million people, of which 60 per cent are daily wage-earners,” an industry executive said. The Tobacco Institute of India is concerned there will be a surge in illegally imported cigarettes.

The Union health ministry on September 24, 2015, had prescribed 85 per cent pictorial warnings on tobacco products' packaging, which came into force from April 1. At present, pictorial warnings must take up 40 per cent of the packaging surface.

ITC in a regulatory filing with the Bombay Stock Exchange said implementation of any change in health warnings was an elaborate process that required months of preparation.

“Since the matter of the new health warning was under the parliamentary committee's consideration, the industry was led to believe the government would re-notify new health warnings after considering the its recommendations,” the company said.