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ITC fears slowdown

ITC fears slowdown

Author | Source: Business Standard | Saturday, May 24,2008 8:36 AM

ITC fears slowdown

ITC, one of India's largest diversified conglomerates, said its sales may be hurt by the consumer shift towards lesser taxed and illegal products following the high taxation rates.

The high taxes on tobacco and related products, as much as 30 per cent annually, are compelling people to smoke bidis, chew tobacco and zarda and push contraband trades, according to the Kolkata-based company.

The sales of illegal cigarettes doubled to 300 million sticks a month from around 150 million, ITC said. For example, non-filter cigarettes had become viable as this market was flooded with smuggled and tax evaded cigarettes. This situation could only be rectified through the moderation of taxes on tobacco, minimization of discriminatory taxes between different classes of tobacco products and a regulatory framework, the company said.

The company, owned by British American Tobacco to the extent of 32 per cent, warned that the year ahead would be challenging for its food division due to the rise in prices of wheat, vegetable oil, maize and skimmed milk powder.

The company asked the government for an interim removal of excise duty and standardization of the VAT rate at 4 per cent for all food products to provide relief to the consumers and sustain growth in this sector.

ITC warned that in view of the quantum growth opportunities presented by the education and stationery products market, it would scale down its greeting cards business, adversely impacted by the rapid emergence of e-technology. This business group would now be called the ‘Education & Stationery Products Business'.

The sales of safety matches and incense sticks grew by 8 per cent, but there was a steep escalation in the cost of key inputs such as wood and chemicals. ITC warned that long term sustainability hinged on a uniform taxation policy aimed at providing a level playing field to all the manufacturers.

This, in turn, would attract investments in ‘Mangaldeep' , ‘Madhur 100', ‘Yantra' agarbattis and Wimco matches, besides perfumed and premium aromatic candles under the ‘Expressions' brand.

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