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Contraband cigarettes market estimated at Rs 1,900 crore this year
The Hindu - 15 Jan 2013

High  excise duty on cigarettes in India has resulted in the growth of contraband  trade of the product with the total market estimated to  reach Rs 1,900 crore this year, up nearly 12 per cent from the previous year,  according to industry estimates.

In 2010-11, the size of contraband cigarettes market in India was  around Rs 1,700 crore.

According to industry players, 17 billion cigarette sticks are  smuggled into the country every year, making India the sixth highest consumer  of smuggled cigarettes in the world.

Experts cited the huge price differential in India and  neighbouring countries as one of the primary reasons for the increase in  smuggling of cigarette in India.

Low cost cigarettes make their way to India from countries like  China, Myanmar, Nepal, Bangladesh, Indonesia and Pakistan, they said.

“Smuggled and contraband cigarettes are becoming a bigger and  bigger problem in India. There are lot of illegal cigarettes, which are  smuggled from outside India and even counterfeit products are also sold in huge  quantity,” an official working with a cigarettes company said.

The government needs to take serious action to control the illegal  trade, he added.

The smuggled cigarettes of 80 mm size could still be cheaper than  an authentic regular sized 70 mm filter cigarette in India. “This is a direct  threat to the filter segment which constitutes 69 per cent of the total Indian  cigarette market,” the official said.

When asked about the factors behind the increase in illegal trade  of the product, he said, “Extreme high excise duty and VAT rate on cigarettes  in India make smuggling a particularly attractive proportion.”

Citing an example, he said the total tax on a legitimate Rs 100  pack is as high as Rs 68, but as contraband cigarettes do not pay any of those  taxes, they are priced at up to Rs 80 and still allow a high margin.

According to the industry estimates, 60 million sticks are  smuggled every month in Mumbai followed by 35 million sticks in Delhi and 20  million sticks per month in Pune, Bangalore and Hyderabad.

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