ITC Ltd, India’s largest cigarette maker, and other cigarette firms have agreed to restart cigarette production in phases with packs having 85 per cent pictorial warning to comply with the Supreme Court’s order.
The new packs will have just 15 per cent of the total area for branding and printing other details such as name of the factory, price and date of manufacturing. However, the cigarette firms believe that it will put its products at a disadvantage in the retail shelves since the illegally smuggled or locally produced tax-evaded packs will have very little or no warning at all.
The company had shut production on May 4, saying it was not in a position to comply with the Supreme Court order. The court had asked cigarette makers to produce packs with 85 per cent pictorial warning until the Karnataka High Court passes its judgement on the fate of the various writ petitions filed by the industry challenging this requirement.
The Apex Court has asked the High Court to pass its judgement within eight weeks. Previously, cigarette packs were required to carry graphical warning covering only 40 per cent of the front of the pack.
The Indian legal cigarette industry has been facing a continuous drop in demand because of high taxation and the growth of duty-evaded illegal cigarettes that do not carry pictorial warnings. Since 2012-13, the excise duty on cigarettes, at a per unit level, has gone up cumulatively by 118 per cent with increase in taxation in every successive year.
ITC shuts cigarette factories
ITC Ltd had earlier shut down its cigarette production with the company weighing a future course of action on whether to comply with the Supreme Court’s order of printing a pictorial warning against tobacco consumption covering 85 per cent of cigarette pack in the interim period or wait for the Karnataka High Court to decide on their fate.
In a notice to the stock exchanges, ITC had said, “We had to shut its cigarette factories from May 4 until the company is in a position to comply with the interim requirements pending hearing in the Karnataka high court”.
This was the second time since April that ITC has decided to shut production.
The Supreme Court on its part had reminded tobacco makers of their ‘duty to society’ and had asked them to carry pictorial warnings spread over 85 per cent of both sides of their packaging as mandated by the government.
The Apex Court passed an order transferring to the Karnataka High Court, all writ petitions pending in various courts challenging the rule.
India’s Government and tobacco industry are at loggerheads over the regulations, which require that pictorial warnings cover 85 percent of a pack’s surface, up from 40 percent of just the front panel. At the same time, prolonged industry closure could hurt Government revenues, since taxes constitute as much as 60 percent of the selling price of cigarettes in India.