India

The Indian white stick segment is once again bowing to the inevitable and prices to consumers have already risen in response to significant excise hikes. The effective rates of taxation on cigarettes was 190%, but the government’s new budget has slapped on another 17% or more in excise duties.

"An increase in cigarette prices is inevitable," siad ITC vice president Nazeeb Arif quoted who was by PTI. "This time there has been an unprecedented increase in the scale of excise. We are currently evaluating the impact and going forward we have to look at our pricing strategies. We will take a decision [on price increases] based on the market leader [ITC] and at this point there is no other option but to pass on the hike in excise to the consumer," agreed Nita Kapoor, executive vice president (marketing) for Godfrey Philip. "By how much and to what extent remains to be seen."

Shortly after these statements were issued, ITC announced price increases across its catalog, including a 7% hike on its iconic Gold Flake Kings.

Excise tax on filter-tipped cigarettes longer than 75mm and less than 85mm was raised 11% to Rs1,959 (US$42) per thousand sticks, while the duty for tobacco products between 70mm and 75mm was raised to Rs.1,473 rupees for a thousand sticks from Rs.1,323. The duty for filter-tipped tobacco products between 60mm and 70m was increased 18%. However, the tax on filter-tipped and non-filter-tipped cigarettes less than 60mm in length was cut to Rs.669 from Rs.819 for a thousand sticks, the government said.

ITC does not have any cigarettes shorter than 60mm in its inventory currently, but the odds are that they will have to start developing some soon.

"ITC has to bring in shorter length cigarettes to compensate for the fall in volume because of the tax increase," according to analyst Abhijeet Kundu Antique Stock Broking Ltd. in Mumbai who was quoted in the local press.