ITC hikes cigarette prices after FM Sitharaman’s Budget announcement

By: |
February 13, 2020 12:34 PM

FMCG major ITC has hiked its cigarette prices days after Finance Minister Nirmala Sitharaman’s Budget proposal to raise excise duty on tobacco and cigarettes.

ITCEvery three in four cigarettes sold in the country are an ITC product, making the FMCG player crucial in the cigarette industry.

FMCG major ITC has hiked its cigarette prices days after Finance Minister Nirmala Sitharaman’s Budget proposal to raise excise duty on tobacco and cigarettes. There has been a price increase, an ITC spokesperson told Financial Express Online, without divulging details. Earlier, the Financial Express had reported that ITC, which is India’s largest cigarette maker, is likely to incorporate a price revision due to an increase in the National Calamity Contingent Duty (NCCD) component. The NCCD component has been revised upward between 212% and 388% depending on cigarette stick size. NCCD is a duty on the excise.

The ITC spokesperson also said that price revision has occurred across different bands for different sizes of cigarettes. Every three in four cigarettes sold in the country are an ITC product, making the FMCG player crucial in the cigarette industry. With ITC hiking prices, it remains to be seen whether rival companies such as Godfrey Phillips and VST Industries too will make cigarettes costlier. 

“The NCCD component has been increased by 2-4 times across stick sizes. This has resulted in tax hikes in the range of 9-15% thereof. The tax hikes, in effect, at the portfolio level is likely to be about 11%, which means the company would need to raise MRP by 6–7% to offset the same,” Abneesh Roy, Executive Vice President, Edelweiss Research had said after Budget announcement. 

In its this quarter earnings, ITC posted a revenue from its cigarette business alone at 4.68% on-year at Rs 5,310.98 crore. Its operating profit also jumped from the segment by 5.57% on-year at Rs 3,755.97 crore. However, the diversified conglomerate had said that its cigarette division during the quarter has reported persistent weakness, especially in rural markets and wholesale channel.

Meanwhile, ITC’s share is trading at Rs 211.70 On Thursday on the Bombay Stock Exchange, down by 0.63% in intraday trade. ITC has a market cap of Rs 2.60 trillion.

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