NGOs acting as cigarette smuggling companies’ agents: ITC

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 accused a section of NGOs of acting as agents of companies smuggling cigarettes into India.

“Smuggling has gone up significantly over the last three years and more than 100 percent increase in duties has taken place. So, we are the most expensive cigarettes in the world on the basis of per capita income,” Deveshwar told media persons here after the company’s annual general meeting (AGM).

He said the smuggled cigarettes come from China, Indonesia, Pakistan, Bangladesh and other countries and carry no pictorial health warning.

“These NGOs (who are promoting lessening of cigarette consumption) are agents of those people who want to smuggle inside this country because from where the funding comes, in that country there is no pictorial warning,” he said.

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

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

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

The industry veteran said duty-free shops were 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 as taxes during 2014-15, he said, informing it has taken up the issue of the taxation structure with the central and state governments.

“Hopefully next year there will be more rationality,” he said.

During the first three months of the current fiscal, the ITC’s cigarettes business, accounting for the major chunk of its sales, fell nominally by 1.22 percent contributing Rs.4,149.61 crore, as against the Rs.4,201.06 crore it contributed in April-June of the previous fiscal.

“Smuggled cigarettes comprise 20 percent of the market and the Indian exchequer loses Rs.7,000 crore each year on account of this,” he said.

“I have been telling policy makers that do not think that by reducing consumption of the legal Indian cigarettes, you have eliminated their consumption. It is all gone to the cigarette that is smuggled,” he said.

The official sought the Indian regulatory framework to be aligned for making the country globally competitive.

Addressing the shareholders at the AGM, Deveshwar called for “unambiguous, simple and transparent” policies and procedures which do not curb entrepreneurial initiative.

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 the 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.

In India, the company has envisaged an investment outlay of Rs.25,000 crore in 65 projects, of which 20 are underway.

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

“This is because we are creating businesses of the future,” he said.

It 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.

 

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