Lockdown puff: Cigarette prices on fire thanks to black marketers

Cigarette prices pan-India are witnessing a steep 50-80 per cent rise over their sticker rates, thanks to blackmarketing.

The virus-induced lockdown has already led to suspension of production by cigarette-maker and a subsequent supply-side shortage is inevitable.

Street-side shops, including some “fair price ones”, continue to remain closed. And, grocer shops remain the major source when its comes to selling cigarettes.

Apart from asking for a premium, stores have also begun rationing sales, by limiting the number of packs one can buy. For example, shopkeepers are selling not more than one packet of cigarette to a customer and even that is being sold at 50 per cent premium. In border areas, smuggled cigarette brands from neighbouring countries are on the rise.

Supplies cut, shops closed

“We would like to urge consumers not to pay more than the MRP printed on the retail packages,” an ITC spokesperson told BusinessLine . ITC Ltd continues to be a dominant player in the segment.

Incidentally, prices went-up in a phased manner.

During the initial days of the lockdown, when most people had stocked up, the asking rate was around 10-15 per cent (over MRP). In some cases, cigarettes were sold at printed price too. Subsequently by the end of the first week, it inched up to 20-25 per cent over MRP. By the second week, this was hovering at 50 per cent of the mark. In some instances price rise is between 60 per cent and 70 per cent.

According to a market analyst, black marketing is typically seen during a “bridge period”. This refers to a time gap when a company announces a price hike but new stocks with a changed MRP is yet to come in; or, a period when people sell some old stock at new MRP.

“But, this time, there are no supplies. Most shops are closed. Production remain suspended across the major players,” the analyst said.

Production suspended

Cigarettes do not fall in the list of essential items. And, majors like ITC and Godfrey Phillips - makers of Marlboro – have suspended production for the time being. The situation is expected to remain the same in the immediate short-run as there has been no clearance from authorities to resume production, said market sources.

On March 25, Godfrey Phillips, in a notification to the bourses maintained that “the company has suspended operations at its factories and plant locations.” Necessary action will be take as per government directives.

ITC Ltd, in a BSE notification also said, it was temporarily suspending production of non-essential items and operating with a “limited workforce” for the essentials.

“Apart from the factories manufacturing essential items, the company has suspended operations at its factories and plant locations. The company is closely monitoring the situation and will decide on resumption of its operations based on further directives from the government,” ITC’s notification maintained.

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