Cigarette manufacturers are raising prices in the backdrop of a nearly 50 per cent jump in tobacco prices.
In fact, market leader ITC has increased prices of its Gold Flake brand of cigarettes from Rs 40 to Rs 44 for a pack of ten. An ITC spokesperson said one of the reasons behind the increase was tobacco prices were ruling very high. Gold Flake is ITC’s largest-selling brand.
The prices of Deshi tobacco are currently being quoted around Rs 1,300-2,000 per 20 kg, depending on the quality and period of payment. The prices of the same variety hovered around Rs 1,200-1,400 per 20 kg last year. However, ITC has hiked prices only for the Gold Flake brand. Other brands in the ITC portfolio are Insignia, India Kings, Classic, Silk Cut, Navy Cut, Scissors, Capstan, Berkeley, Bristol, Flake.
Other manufacturer Godfrey Phillips (India) is yet to decide about the price hike. Nita Kapoor, vice-president (marketing and corporate affairs), Godfrey Phillips, said, the company reviews prices typically twice a year, at the onset of the financial year and towards the end of April and the middle of the year. “We have not planned anything as yet,” she said.
Kapoor however pointed out that prices were directly related to input costs as prices of some of the varieties have almost doubled over the last year.
Cigarette manufacturers source their entire requirements from tobacco auctions. The Tobacco Board lays down the policy every year with a view to regulate the production and curing of Virginia tobacco.
The board assesses the crop requirement for the domestic and export needs in consultations with growers associations and the Indian Tobacco Association, after which the crop size is fixed.
According to Vijay Chugh, analyst with Ambit Capital, tobacco prices have gone up sharply in recent times due to low global supply. India is the second-largest tobacco producer after China and demand for export has resulted in a sharp rise in prices in the domestic market. He said that farmers in Andhra Pradesh have received rates nearly at Rs 100 per kg compared to Rs 60 last year for their produce.