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Tobacco shrugs off excise hike

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The tobacco industry, dominated by the three cigarette manufacturers ITC, GPI and VST, seems to be more or less resigned to a yearly hike in excise duty via the Union Budget, and a five per cent increase in duty this time does not have the industry too worried. Or so it seems, given the response from certain quarters of the industry to the Budget hike. And from the consumers' point too, a 5 per cent increase for that much needed puff seems to be no big deal.

Some of the consumers in the Central Business District of Kolkata, particularly those who smoke Gold Flake or Wills Filter (10s), felt an immediate hike in price generally does not happen to an established brand after a Budget increase in excise, and a 5 per cent top up may not pinch.

According to industry insiders, a 5 per cent hike in excise was small, and may not be passed on to the consumer, particularly when the market was flat at the moment.

The main industry worry still seems to be that while cigarettes continue to bear the brunt of the excise hikes, bidis, which outsell cigarettes by eight times, are let off.

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(This article was published in the Business Line print edition dated March 1, 2006)
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