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22 Feb 2017

Budget fallout - Cigarette prices hiked by ITC

India's largest cigarette maker ITC is all set to increase the price of its leading product range by as much as 13% as a fall out of the excise duty hike proposed in the Budget early this month.

Starting this week, pack containing 10, 84 mm 'India Kings' will cost Rs. 150 while similar packs of 'Classic' and 'Gold Flake Kings' Rs. 139 each.

In context

ITC to increase cigarette costs by 13%

ITC had increased prices before the Budget

Before the budget was announced on February 1, ITC had hiked rates for its 69mm and 74mm cigarettes, including top-selling brands Navy Cut and Gold Flake (regular), by about 14%. However, no further price hikes are expected for cigarettes of these length anytime soon.

Increased sale volumes match increased prices in 2017-18


Increased sale volumes match increased prices in 2017-18

Post-budget, analysts have estimated at least a 5% rise in ITC's cigarette volumes of sale. The figure was revised from 3% (pre-budget) as the excise hike (lowest in the past six years) was below the expected 8-10%.

Analysts expect that ITC may again increase the price of its 69mm and 74mm lengths by around 4% to push the increased excise duty on customers.

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Cigarette rates and budgets since 2014

Excise duty on cigarettes has especially peaked since finance minister Arun Jaitley announced his first budget in July 2014. In 2015, this duty was increased up to 25% depending on length. Government hikes excise duty on cigarettes and tobacco products in every budget.

In 2016, the cigarette maker had hiked cigarette rates by 12.8% after the budget proposed to increase excise duty by 10-15%.

Tobacco lobby unhappy with high excise duty

Tobacco Institute of India, the association that lobbies for cigarette companies, has long been vocal about high tax structure. It claims that this structure has created the market for smuggled foreign cigarette and affects legal cigarette manufacturers. Cigarettes account for 11% of India's tobacco consumption.

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