ITC questions rationale of airports selling duty-free cigarettes

Kolkata, July 31 (IANS) Consumer goods major and cigarette maker ITC Ltd. on Friday questioned the rationale of selling duty-free cigarettes at airports and sought the Indian regulatory framework to be aligned for making the country globally competitive.

Addressing the shareholders at the company’s annual general meeting here, its chairman Y.C. Deveshwar also called for “unambiguous, simple and transparent” policies and procedures which do not curb entrepreneurial initiative.

He said the ITC was on the growth path as far as its top line was concerned, but the bottomline performance was not that impressive.

“We are on a growth path as far as top line is concerned but not in the bottomline. This is because we are creating businesses of the future,” he said.

Reiterating that the company has targeted a Rs.100,000 crore revenue by 2030 from its FMCG business, Deveshwar said: “We will enter all the segments which qualify under the tern FMCG… Our aspiration is to become the leading FMCG player in India.”

The industry veteran wondered while other cigarettes produced in the country were subject to heavy taxation “why should our airports sell duty-free cigarettes?”

Deveshwar said: “Our 100-year-old cigarette business is under severe regulatory pressure.”

“A back-up plan had started 10 years ago,” he said, replying to a shareholder.

The industry veteran said duty-free shops are also providing a cover for smugglers.

Referring to the revenue the states and the centre earn by taxing cigarettes, he said, “Don’t kill the golden goose that lays the egg.”

The company had paid Rs.27,000 crore during 2014-15 to the exchequer in the form of various taxes. He said the company has taken up the issue of the taxation structure with the central and state governments.

“We are in communication with both centre and state government and hopefully next year there will be more rationality,” he said.

During the first three months of the current fiscal, the ITC’s cigarettes business, which accounts for the major chunk of its sales, fell nominally by 1.22 percent contributing Rs.4,149.61 crore compared to the contribution of Rs.4,201.06 crore during the first three months of the previous fiscal.

Deveshwar said while much was being done in terms of ease of doing business, it was equally important to create a “shared vision of responsible competitiveness among the regulators and developers of industry”.

He argued that regulatory policies so long have been created in silos and one objective has been sacrificed to promote another to develop the economy and promote entrepreneurship in the country.

“Policies and procedures must be unambiguous, simple and transparent. They should discourage arbitrary regulatory action in the field, thereby not curbing entrepreneurial initiative,” the official said.

“Every regulatory framework must answer the primary question — will it help in making India globally competitive?”

Deveshwar said the composition of India’s external trade highlights the lack of its competitiveness in the international domain and brands within the country needed to be built first.

“I truly believe that the Make in India vision will be significantly reinforced when national champions (Indian-origin companies which are globally competitive) create winning Indian brands,” the industry veteran said.

He said the company would venture into dairy products soon.

The ITC Ltd. has emerged as one of the fastest growing consumer goods company over the last 10 years and its packaged food portfolio has expanded substantially.

The major business segments for the company are consumer goods, agri-business and services, besides hotels.

Presently, two integrated consumer goods plants in Maharashtra and West Bengal, a food manufacturing and logistics facility in Punjab and a packaged food manufacturing unit in West Bengal are underway.

The company has 250 owned-and-outsourced manufacturing units.

It is building its second hotel in West Bengal with an investment of Rs.1,000 crore and had lined up Rs 3.500 crore investment for the state.

Besides the upcoming hotel, the Kolkata-based company is also building two factories and one infotech centres in the state.

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