Kesari Upadhyay, a 40-year-old owner of a cigarette, pan and gutkha shop in the busy BBD Bag area in the city, is not perturbed by today's announcement of an excise duty hike on cigarettes and hand rolled bidis.

“Daam ka koi zyada asar nahi padhta. Pehle din grahak packet ke badle stick leke jaate hain, lekin dusre hi din se vapas packet hi kharidna shuru kar dete hain (The rising prices hardly have any impact on my sales. The first day a customer opts for a stick instead of a pack of cigarette, however, from the very next day they go back to their old purchase habit),” Kesari told Business Line .

The Union Budget has proposed to increase excise duty on “demerit goods” like certain cigarettes, hand rolled bidis, pan masala, gutka , chewing tobacco, unmanufactured tobacco and zarda- scented tobacco.

The price of ‘king-sized' cigarettes have inched by almost Rs 10 a pack, while that of ‘regular-sized' ones have increased by Rs 5-6 a pack in the last one year.

The corporate view

“A new duty on cigarettes has been introduced. We will be able to evaluate the impact only after studying the Finance Bill,” an ITC spokesperson said.

According to Mr Udayan Lall, director, The Tobacco Institute of India, higher cigarette excise duties will adversely affect the earnings and livelihoods of the cigarette leaf tobacco farmers who have already been going through tough times.

“Increase in cigarette excise duties will substantially aggravate the tax arbitrage between duty-paid and duty-evaded cigarettes. This huge arbitrage will, unfortunately, incentivise the rapidly growing trade of excise-evaded and smuggled cigarettes,” Mr Lall said.

> shobha@thehindu.co.in

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