Budget 2015: Smokers hit hard as excise duty on cigarettes and cigars hiked

NEW DELHI: Smoking will become costlier yet again with excise duty on cigarettes and cigars being hiked for the fourth consecutive year. Cigarette makers are yet to quantify the exact price hike, but analysts at Edelweiss and Religare estimate the price of smaller-size cigarettes (those below 65 mm in length), currently sold at below `3 per stick, to go up by 50 paise. Prices of regular and king-size cigarettes are expected to go up by 10-13%.
A stick of Classic, which currently sells at Rs 9.50, will now cost around Rs 10.5. The Budget has proposed a 25% increase in excise duty on cigarettes of length not exceeding 65 mm and a 15% increase on cigarettes of other lengths, cigars, cheroots and cigarillos. The Budget has also increased the excise duty on cut-tobacco to Rs 70 per kg from Rs 60 per kg. With this, the weighted average increase of excise duties on cigarettes has been 75% in the past four years.

After the 21% average increase in excise duty in the July 2014 Budget, cigarette sales volume declined by around 15%, a double-digit drop for the first time in several years. "The excise increase will not only boost the already large illegal cigarette trade, but also accelerate the shift in consumption to cheaper, revenue-inefficient tobacco products, resulting in a loss in revenue and further increasing the consumption of tobacco in the country," said Syed Mahmood Ahmad, director of Tobacco Institute of India. Share price of India's largest cigarette maker, ITC crashed 8.27% to Rs 361.25. Godfrey Phillips India fell 1.9% to Rs 470.