The Hindu Business Line : Hike in excise duty on cigarettes may lead to shifting of brands

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Hike in excise duty on cigarettes may lead to shifting of brands

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Kolkata March 1 While the tobacco companies were not willing to comment offhand on the Budget proposal to raise specific rates of excise duty on cigarettes by about 5 per cent, industry watchers in the know told Business Line that it may not have too high an impact on prices, though it could lead to shifting of brands from the consumers' point of view. It is felt that a price hike may be higher in the premium brands, which are not actually volume-driven.

According to some experts, while there may be some shifting of brands (switching to lower-priced cigarettes), the tobacco companies are traditionally known to respond to such tax increases through re-worked price-based marketing strategies to somewhat offset the impact on the consumer. And for the down town paanwallah, whose customers range from the young to the old, budget hikes (excise) in cigarettes do not have any immediate impact, as wily customers stock up in advance.

Asked for his comments, Mr Udayan Lal, Director, Tobacco Institute of India, said, "Costlier cigarettes would straightaway lead to greater availability of imported cigarettes". He felt the price differential between the domestically produced cigarette and the imported one would be so sharp that it would lead to a spurt in consumption of cigarettes, which defeats the very purpose of tobacco control.

Describing the Budget as pro-agriculture, he said the proposed financial mechanism to be put in place for re-plantation and rejuvenation for agri commodities such as coffee, rubber, spices, cashew and coconut should include tobacco also. Mr Lal said tobacco exports last year yielded a tidy sum of Rs 1,400 crore, and provides livelihood to some 28 million farmers.

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