FMCG major ITC Ltd has adequate cigarette stocks available in the market to prevent black marketing, sources say. Enquiries in Kolkata reveal cigarettes are mostly selling at print price.
ITC has stopped production in all five units after the government mandated that cigarette packs require larger pictorial warnings.
The closure is expected to continue till there is clarity on the matter.
The Kolkata-based diversified conglomerate’s units are located one each at Kolkata (West Bengal), Pune (Maharashtra), Munger (Bihar), Saharanpur (Uttar Pradesh) and Bengaluru (Karnataka).
“Adequate stocks are available in the market,” a company source told BusinessLine , when asked about how it will take care of local demand (in India).
They could not confirm if the production for exports were being carried out from these units.
“ITC has been compelled to shut its cigarette factories from April 1, 2016,” the company said in a filing with the stock exchanges on April 2, day after it closed the production units.
The implementation of any change in the health warnings on the cigarette packs is an elaborate process for the manufacturers, entailing months of preparation involving substantial cost and effort.
Further, the question of legality of the new warnings continues to be pending before the Court.
In this situation, ITC said, it did not want to commit to wasting substantial resources in creating the large number of cylinders and other tools necessary for a change-over of the warnings.
According to sources, the loss for the industry is expected at ₹350 crore per day.
On Thursday, ITC stock closed at ₹319.60, down by 1.99 per cent down on the BSE.
Bidi industry Meanwhile, the All India Bidi Industry Federation maintained that it was “stopping production” as it was not possible to print the new warnings, as stipulated.
According to the industry body, the curved area and wrapping paper edges, prevent printing on a reasonably large area of the curved surface.
“The practical impossibility implies that the bidi industry cannot implement the new warning rules in its present form. Therefore, it is not possible to produce bidis without violating the law… There is no option but to stop production,” it said in a statement issued on Thursday.
The bidi industry employs 80 lakh rollers, mostly women from rural areas and engages around five lakh people who do the packing manually. It supports more than two crore people directly and indirectly, the federation maintained.
Hyderabad Bureau adds: VST Industries had clarified to the BSE that because of the prevailing ambiguity, the company has decided to suspend its production, temporarily awaiting clarity on the new print warnings on packs.
“As of now, we do not anticipate any material impact on the financial performance of the company on account of the aforesaid temporary suspension of production,” it had added.
It may be recalled the revised health warnings to be effective from April 1, 2016, were notified by the government in September 2015.
This was challenged in the courts. Further, a parliamentary sub-committee was also set up to look into the aspects of health warnings. It has filed its report on March 15, 2016, reducing the size of the health warnings.