ITC to resume cigarette production

After halting tobacco production for 15 days following a new ministerial directive calling for covering 85 per cent of the cigarette package area with health warning, cigarettes to FMCG company ITC will soon resume production of cigarettes, the company said.

In a filing with the Bombay Stock Exchange, the company said the decision follows a ‘High Court order passed in favour of the company’ whereby it will “soon resume manufacture of cigarettes in its factories”.

However, when contacted for clarity about the High Court order, the company refused to share any details about the judgement.

It is unknown if the cigarette manufacturers will adhere to the ministerial directive to cover 85 per cent of the packaging with health warnings.

The Kolkata-based company had earlier temporarily suspended manufacturing operations at all its five cigarette factories stating “lack of clarity” in the policy regarding printing of larger pictorial warnings on the packets. Its manufacturing plants are located in Bengaluru, Munger, Saharanpur, Kolkata and Pune.

Other majors like Godfrey-Philips India and VST too had taken a similar stand in line with the industry.

The move comes in wake of a minor tobacco player, Golden Tobacco Ltd, rolling out cigarette packs adhering to the new ministerial directive by covering 85 per cent of the package with health warnings.

The Tobacco Institute of India (TII), which, on behalf of the tobacco industry had earlier written to the health ministry over the hazards in implementing the new directive is, however, unaware of the move.

“Members of the TII that account for more than 98 per cent of the country's domestic sales of duty-paid cigarettes in India, have unanimously decided to shut all their cigarette factories from April 1. Owing to ambiguity in the policy related to the revision of graphic health warnings on tobacco product packs, the members are unable to continue manufacturing cigarettes”, TII had earlier said.

Complaining about lack of adequate supplies as the cigarette major halted production, tobacco sellers all this time had hiked the prices (higher than the maximum retail price) of ITC branded cigarettes across the country between 6-25 per cent.

However, despite ITC stating its decision to resume production, the ambiguity over cigarette prices being charged higher than MRP remains.

“Even if they start production today, it will take some time to reach us. Till then, the low stock crisis will go on”, Mohammed Hussein, a tobacco wholesaler in Kolkata who sells ITC branded cigarette said.

Nevertheless, the low stock crisis is poised to ease as ITC commands a near 80 per cent market share which will ease as production resumes.

“Since ITC is the market leader, the low stock crisis was majorly centered around them. If it begins rolling production again, the higher than MRP prices prevalent now will gradually ease. We, being a fair shop had continued to sell cigarettes at MRP”, B. Shaw, owner of a fair price cigarette shop said.

However, ITC had stated that adequate stocks were available in the market at the time it had halted production.

The Union health ministry on September 24, 2015, had prescribed 85 per cent pictorial warnings on tobacco products' packaging, which came into force from April 1. At present, pictorial warnings must take up 40 per cent of the packaging surface.