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K.R. Srivats

With contrabands, domestic cigarette companies are afraid that their profit will go up in smoke.

NEW DELHI, March 25

CONCERNED over the recent surge in import of contraband cigarettes, ITC Ltd has made out a case for reviewing the clause in the Exim Policy which allows import of cigarettes under customs bond for re-exports.

At a meeting with the Revenue Secretary, Dr S. Narayan, the Chairman of ITC, Mr Y.C. Deveshwar, asked the Government to consider exclusion of cigarettes from an Exim policy pronouncement that allows imports through a customs bond for export in freely convertible currency without a licence.

"It is our opinion, most of the contraband cigarettes imports into India, are done through the re-export route. We have, therefore, asked the Government to exclude cigarettes from Para 11.8 of Exim Policy,'' a senior ITC official told Business Line here.

Under this clause, goods, including restricted items, are allowed to be imported under customs bond for export in freely convertible currency without a licence.

The contention of domestic cigarette manufacturers such as like ITC is that this facility for import and re-export without any value addition does not give any additional tax revenues to the exchequer and is being misused for bringing in cheaper contraband cigarettes from neighbouring countries such as Bangladesh.

Company officials said that ITC Ltd has also sought

a review of the Centre's decision to reduce the basic customs duty on cigarettes and unmanufactured tobacco to 30 per cent from 35 per cent.

It has, instead, petitioned for a hike in customs duty on cigarettes to the WTO-bound level.

The domestic cigarette industry reckons that a reduction in import duty of cigarettes in this year's Budget would further encourage its import into the country. Domestic manufacturers have contended that the surge in imports of cigarettes has had an adverse impact on their sales volume. The volume of sales, in fact, declined by 11 per cent to 78.3 billion sticks during April-December last year. A ban on sale of cigarettes in duty-free shops has also been mooted.

"We have also told the Government that there is no reason as to why inbound passengers should be allowed to bring cigarettes under the free allowance eligible to them,'' a senior ITC official said.

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