Tobacco shortages in the pipeline

Following the decision by India’s major cigarette manufacturers to stop production on Friday, wholesalers are reporting an inventory shortage and cutting back their shipments to retailers, who have reacted by raising prices by 6 percent to 25 percent, depending on the brand, according to a Business Standard story relayed by the TMA.

ITC, Godfrey Phillips and VST suspended production for the domestic market on April 1 because of ambiguity in the government’s new requirement that graphic health warnings cover 85 percent of a pack’s front and back surfaces.

The price of a 20-piece pack of a king-size premium brand cigarette, such as Gold Flake, is up from Rs246 to Rs260-270.

One distributor was quoted as saying that the cigarette manufacturers had stopped production without providing enough inventory.

However, an ITC spokesperson said there was adequate inventory on the market.

And he said that retailers were banned by law from charging above the manufacturer’s retail price.

Godfrey Phillips said yesterday that its preparatory work for implementation of the new graphic health warnings was currently in progress and that it did not expect its temporary production suspension to have any material impact on its financial performance.