Cigarette smuggling to cost India Rs 26,000 crore: report

Despite the government allowing free imports of cigarettes, India will loss Rs 26,000 crore in 2004 by way of contraband trade.

According to estimates of the Tobacco Institute of India (TII), the contraband cigarette market drains out around Rs 20,000 crore from the Indian economy per annum.

"Retailers tend to push smuggled cigarettes as they come with a 25 per cent margin compared with the eight-nine per cent margin they get through legal deals. Also, when the 555 and Benson & Hedges brands were launched, their advertisements resulted in a two-three fold rise in smuggling of these brands," said a market expert.

The current size of the smuggled cigarette market in India is estimated to be 4.5 billion.

This constitutes around 45 per cent of all the king size brands and around 10 per cent of the total cigarette market in terms of volume.

With the launch of Marlboro, Smapoerna and other foreign brands, the smuggled market of foreign cigarettes may rise to 6.5 billion in 2004, a rise of over 30 per cent.

"The reception of foreign brands will depend on the intrinsic reputation and value offered to the consumers. Already there is demand for contraband supplies which account for nearly five per cent of the domestic cigarette consumption.

"These supplies are reportedly growing at nearly 20 per cent per annum," said Amit C Sarkar, director, TII.

With the government's recent decision to issue licences for free imports of cigarettes, companies such as Phillip Morris and the Kolkata-based National Tobacco Company have started importing foreign brands.

Phillip Morris is importing and marketing the Marlboro brand and National Tobacco Company will import Indonesia's second largest brand Sampoerna.

Other international brands such as Benson and Hedges, State Express 555, Dunhill and Rothmans will soon hit the Indian markets.

Foreign cigarette firms have recently unveiled major promotional campaigns as a government ban on cigarette advertisements will come into effect from March end.

"It is unlikely that imports will be restricted to the king size segment, as is the current position, since it accounts for only a small portion of the domestic market. Imports of other filter-tipped brands are bound to follow the trend.

"According to industry estimates, ITC holds a 71 per cent share of the domestic cigarette market, GPI holds a 10 per cent share, VST nine per cent and the remaining 10 per cent is shared by other manufacturers," Sarkar added.

Brands of domestic manufacture in the king size segment include India Kings, Wills Heritage, Classic, Gold Flake by Indian Tobacco Company (ITC), Jaisalmer by Godfrey Phillips India (GPI), Rave by (VST), More by (JTI), Contessa and Chanceller by (GTC).