Killing domestic cigarette brands not beneficial for nation, says ITC chief

Group transformed by drive to promote other segments, told Y C Deveshwar to the firm's shareholders

To kill a domestic (cigarette) brand in favour of a smuggled one is not in the interest of the country, ITC chairman Y C Deveshwar said at a press conference following the company's annual general meeting.

The cigarette industry is facing one of the steepest rates of taxation, with the Goods and Services Tax (GST) Council recently increasing the cess on this. In six years, taxes have gone up by 202 per cent.

Deveshwar said anti-tobacco groups were focused on only 11 per cent of the consumption; "89 per cent of the consumption is non-cigarettes". He added that there were competitive interests and vested interests here, with smuggled products now 20-25 per cent of the total cigarette industry.

"Will for some vested interest we kill an Indian brand and let a foreign brand succeed? India is one of the very few countries where the cigarette brands are all Indian," he said.

He added that ITC's contribution to the exchequer in the past five years had aggregated to Rs 1,40,000 crore. "But, the decision (restrictions on cigarettes) is with the decision makers and we accept it. And, we are building other businesses. It's a nation-oriented company."

Earlier in the day, Deveshwar told his shareholders that the non-cigarette segments now account for 58 per cent of the net segment revenue, having grown 18-fold since 1996. "Today, the non-cigarette businesses deploy 77 per cent of your company's operating capital and 88 per cent of the employee base, reflecting the radically transformed character of your company," he said.

ITC was the third largest foods company and in the not too distant future, would become the number one. "We are the number one paper company in India," he noted.

He said ITC would continue to do things that were good for India, build Indian brands. "We will compete." He also said the central government had done a good thing by banning some non-government bodies for getting foreign funding.

Both Deveshwar and ITC's chief executive officer, Sanjiv Puri, hailed GST as one of the biggest reforms. However, Deveshwar added, to get it going and arrive at a consensus, the idealism might have been held back. For instance, a distinction was now being drawn between branded and unbranded staples. The GST on branded staples is five per cent. He hoped these would be addressed in due course. As the tax base increased, with more people coming under the GST fold, the rates could be lowered.

After GST rollout, although the fast moving consumer goods sector took a hit in revenue, with destocking by retailers, the disruption was "little" for ITC -- it had been able to post a 6.6 per cent rise in the cigarette business and by nine per cent in the non-cigarette sector.

"Some hiccups are bound to take place during a transition of this scale (GST). But, things are improving every week. Compared to the retail trade, the wholesale channel is taking time (to recover). The amount of disruption has been little. The trade channels will return to normalcy over a period of time," said Puri.