A number of traders have mushroomed in the marketplace sporadically selling these cosmetics and toiletries at highly competitive prices. A genuine brand of imported deodorant, for instance, with the finest packaging, is being sold at a price ranging from Rs 70 to Rs 80. The locally manufactured goods attract a similar price.

This trend, which has started off in a small way, is now being noticed by the domestic manufacturers in a rather serious light as one that could snowball into a major onslaught a few years down the line. Says Godrej Soaps president (consumer products division) Mr HK Press: "The surge in imported goods-cosmetics and toiletries-is beginning to get noticed as an irritant to local manufacturers. All we can do is draw the attention of the government authorities for necessary action."

It is believed that these imported products are largely coming from European markets which are flush with huge capacities. Industry observers perceive a grim scenario even as China, the lowest price manufacturer, has not yet made an entry in the market in this segment. "The situation will get worse two years down the line," predicts an industry observer.

Since prices are unbelievably low, domestic players are trying hard to chalk out distribution strategies to combat the influx. This is mainly because traders of imported cosmetics and toiletries do not have a distribution advantage which the domestic players have. JK Helene Curtis, for one, is expanding its distribution network from one lakh to 3-5 lakh outlets in the next one year.

The total size of the cosmetics and toiletries industry is estimated at Rs 4,000 crore. While estimates are not available, industry analysts say that the size of unorganised imports could be anywhere between Rs 100-300 crore.

This is estimated to be growing at a minimum rate of 10 per cent per annum.According to Indian Soap and Toiletry Makers' Association (Istma) president Mr VP Menon: "We have to live with this situation. The domestic manufacturers will have to gear up to combat the imported goods onslaught as there is nothing we can really do. We had initially raised objections, but this is part of the government's liberalisation policy."

When the government progressively brought down the excise duties of cosmetics and toiletries from 120 per cent to 30 per cent, the incidence of imports dropped. However, that of alcohol-based toiletries - such as deodorants, aftershaves and perfumes - continues to rise as the excise duty on these products is still high at 50 per cent.

There is an import duty and a countervailing duty equivalent to the local excise duty. A high excise duty structure, the industry feels, is a great incentive for traders to import products - either through the official or unofficial channels which cannot be traced.

With growing aspirational levels and changing lifestyles, these products are finding ready buyers in the marketplace at the same price as those attracted by locally manufactured products. Though this segment of the market is still nascent, it is growing rapidly on a low base. "We are not able to reach the full potential of the market growth," admits Hindustan Lever head (speciality business) Mr Anil Chopra. HLL, which recently introduced Unilever's prestige brands Calvin Klein and Elizabeth Arden at the super premium end of the market, is further strengthening its portfolio to tap the growth potential.