``We have no choice. We are getting ready to shift our factories to these states,'' said Tobacco Institute of India (TII) chairman and Godfrey Phillips India chief executive Ram Poddar in an exclusive interview to The Financial Express.

``Excise forms one-third of cost of manufacturing of cigarettes. Our profits will multiply by six to seven times if we shift manufacturing to the north-east,'' he added.

He, however, strongly criticised the Government's move, terming it a decision which will benefit certain state governments at the expense of other states.

``The move to make cigarettes excise exempt in certain areas of Tripura and Assam is discriminatory to other states. It will take our investments out of other states and into thenorth east,'' argued the TII president. TII is the representative body of the cigarette industry, comprising of ITC Ltd, GPIL and Vazir Sultan Tobacco (VST).

Poddar argued that if the Centre wanted to raise revenues from the cigarette industry, a better move on the Government's part would be to lower excise rates and tax burden for cigarette factories wherever they are based.

``A drop in excise duties will lower prices of cigarettes, raise consumption and revenues,'' pointed out Poddar. The TII is strongly opposed to the move to exempt cigarettes from excise duties in the north east. It has warned of a mass re-location of cigarette industry to north east states and even of fraudulent practices by cigarette companies which will rob Assam and Tripura of any real gains.

The finance ministry had declared cigarettes as excise exempt in specified areas of Assam and Tripura in July, 1999, as part of the prime minister's package for the north east.

However, on December 31, the Centre amended this notificationand excluded cigarettes from the list of excise exempt products.

Less than 20 days later, a notification issued on January 17, nullified the above by again making cigarettes as excise exempt in the north east. The Government back-tracking is believed to be under pressure from politicians belonging to Assam and Tripura.

The three cigarette majors, ITC, GPIL and VST have submitted individual proposals with the Government for setting up cigarette manufacturing capacity in the north east.

ITC Ltd had put in a proposal for setting up a 60 billion sticks per annum project in Assam with an investment of about Rs 525 crore.