ITC, however, seems to be a reluctant participant in the race with Godfrey Philips India to set up a project in the north-east region. According to ITC's executive vice-president, marketing, KN Grant, "The exemption of excise duty in specified areas of Assam and Tripura will seriously affect government's revenue collections. This move can induce a large scale shift of cigarette manufacturing facilities from the rest of India to these specified areas. The extra freight and manufacturing cost in the north-east will be miniscule as compared to the huge gains that companies can derive from the excise exemption."

Industry sources say that ITC and GPI's move could have grave implications on excise revenue earnings of the government, which currently stand at Rs 6000 crore per annum, as the twocompanies together command a market share of 82 per cent.

The ITC and GPI move could also jeopardise the existence of the bidi industry since excise exemption could bring down cigarette prices by 30-60 per cent and lead to migration of bidi smokers to non-filter low-end cigarettes. It would also result in loss of employment in states where the cigarette companies have their manufacturing facilities at present.

For example, ITC retails Scissor and Capstan brand plain cigarettes of below 60-mm length at Rs 3 per pack of 10-cigarettes. This category attracts an excise duty of Rs 110 per thousand sticks or 11 paise per cigarette. Once the company starts manufacturing at the Assam project, it could retail these brands for as low as Rs 2 per pack, posing a direct threat to the bidi industry.

Similarly, a pack of Gold Flake filter cigarettes, which currently retails at Rs 21 for a pack of 10-cigarettes, could be sold at as low as 10 per pack as the company would no longer be required to pay the current exciselevy of Rs 1.20 per stick.

The Tobacco Institute of India has also reacted sharply to the excise exemption sops offered by the government in the north eastern region.

The Institute has written to finance minister Yashwant Sinha seeking removal of the cigarette industry from the excise exempted industries list. It has cited the example of Sikkim where excise duty was exempted for some time till February 1983 which saw mushrooming of cigarette producing facilities in the state having capacities of 500 million sticks. These facilities, however, closed down once the excise duty exemption was withdrawn.