ARP-I Praposal Indian Tobacco Industry 3
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Transcript of ARP-I Praposal Indian Tobacco Industry 3
Chapter 1
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1.1.Introduction of tobacco industry
The tobacco industry is one of the most profitable industries in the world. Tobacco companies
use their enormous wealth and influence both locally and globally to market their deadly
products. In India, the tobacco industry is divided into three distinct and powerful sectors: bidis
(smoking products hand-rolled in tendu leaves), smokeless tobacco (mainly chewing tobacco)
and cigarettes. Bidis are the most popular tobacco products consumed in India- 48% of the
market. Smokeless tobacco makes up 38% and cigarettes only 14% of the market. Some aspect
of the tobacco industry, whether it is tobacco farming, manufacturing, or distribution, is present
in every Indian state, making tobacco control a truly national effort. The tobacco industry in
India has sections on each of the tobacco sectors as well as examples of tobacco promotion,
sponsorship and corporate social responsibility efforts designed to increase consumption and
industry profits.
1.1.1. History of tobacco
Tobacco has a long history in the Americas. The Mayan Indians of Mexico carved drawings in
stone showing tobacco use. These drawings date back to somewhere between 600 to 900 A.D.
Tobacco was grown by American Indians before the Europeans came from England, Spain,
France, and Italy to North America. Native Americans smoked tobacco through a pipe for special
religious and medical purposes. They did not smoke every day.
Tobacco was the first crop grown for money in North America. In 1612 the settlers of the first
American colony in Jamestown, Virginia grew tobacco as a cash crop. It was their main source
of money. Other cash crops were corn, cotton, wheat, sugar, and soya beans. Tobacco helped pay
for the American Revolution against England. Also, the first President of the U.S. grew tobacco.
By the 1800's, many people had begun using small amounts of tobacco. Some chewed it. Others
smoked it occasionally in a pipe, or they hand-rolled a cigarette or cigar. On the average, people
smoked about 40 cigarettes a year. The first commercial cigarettes were made in 1865 by
Washington Duke on his 300-acre farm in Raleigh, North Carolina. His hand-rolled cigarettes
were sold to soldiers at the end of the Civil War.
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It was not until James Bonsack invented the cigarette-making machine in 1881 that cigarette
smoking became widespread. Bonsack's cigarette machine could make 120,000 cigarettes a day.
He went into business with Washington Duke's son, James "Buck" Duke. They built a factory
and made 10 million cigarettes their first year and about one billion cigarettes five years later.
The first brands of cigarettes were packaged in a box with baseball cards and were called Duke
of Durham. Buck Duke and his father started the first tobacco company in the U.S. They named
it the American Tobacco Company.
The American Tobacco Company was the largest and most powerful tobacco company until the
early 1900's. Several companies were making cigarettes by the early 1900's. In 1902 Philip
Morris Company came out with its Marlboro brand. They were selling their cigarettes mainly to
men. Everything changed during World War I (1914-18) and World War II (1939-45). Soldiers
overseas were given free cigarettes every day. At home production increased and cigarettes were
being marketed to women too. More than any other war, World War II brought more
independence for women. Many of them went to work and started smoking for the first time
while their husbands were away. By 1944 cigarette production was up to 300 billion a year.
Service men received about 75% of all cigarettes produced. The wars were good for the tobacco
industry. Since WW II, there have been six giant cigarette companies in the U.S. They are Philip
Morris, R.J. Reynolds, American Brands, Lorillard, Brown & Williamson, and Liggett & Myers
(now called the Brooke Group). They make millions of dollars selling cigarettes in the U.S. and
all over the world.
In 1964 the Surgeon General of the U.S. (the chief doctor for the country) wrote a report about
the dangers of cigarette smoking. He said that the nicotine and tar in cigarettes cause lung cancer.
In 1965 the Congress of the U.S. passed the Cigarette Labeling and Advertising Act. It said that
every cigarette pack must have a warning label on its side stating "Cigarettes may be hazardous
to your health." By the 1980's, the tobacco companies had come out with new brands of
cigarettes with lower amounts of tar and nicotine and improved filters to keep their customers
buying and to help reduce their fears. The early 1980's were called the "tar wars" because
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tobacco companies competed aggressively to make over 100 low tar and "ultra" low tar
cigarettes. Each company made and sold many different brands of cigarettes.
In 1984 Congress passed another law called the Comprehensive Smoking Education Act. It said
that the cigarette companies every three months had to change the warning labels on cigarette
packs. It created four different labels for the companies to rotate. Since the 1980's, federal, state,
local governments, and private companies have begun taking actions to restrict cigarette smoking
in public places. The warning labels were the first step. Tobacco companies cannot advertise
cigarettes on television or radio. It is against a law that was passed by Congress in 1971. Many
cities across the U.S. do not allow smoking in public buildings and restaurants. Since 1990,
airlines have not allowed smoking on airplane flights in the U.S. that are six hours or less. State
taxes on cigarettes have increased.
As it becomes more difficult for tobacco companies to sell their products in the U.S., they are
looking outside. U.S. tobacco companies are now growing tobacco in Africa, South America
(Brazil and Paraguay), India, Pakistan, the Philippines, Greece, Thailand, and the Dominican
Republic. Fifty percent (50%) of the sales of U.S. tobacco companies go to Asian countries, such
as Thailand, South Korea, Malaysia, the Philippines, and Taiwan.
1.2.History of Indian tobacco industry
India is the world’s second largest producer of tobacco. Endowed with rich agro-climatic
attributes such as fertile soils, rainfall and ample sunshine, India produces various
types of tobacco . Currently, Indian tobacco is exported to more than 80 countries spread
over all the continents. A few of the top multinational companies such as British American
Tobacco (BAT), Philip Morris, RJ Reynolds, Seita, Imperials, Reemtsma etc. and many
companies with government monopoly all over the world import Indian tobacco either
directly or indirectly. The Indian market for tobacco products, however, has some
characteristics rather different from most other markets. India has a large, highly integrated
tobacco industry, involving the growing of a range of leaf types, the manufacture of
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different tobacco products, including unprocessed and chewing tobacco, and an extensive
distribution and retail system. Over the years, a combination of strong prices, domestic
consumption, good export demand for tobacco and low prices of other crops helped the growth
of tobacco from a cash crop to a manufacturing industry linked with commercial
considerations.
The tobacco industry in India includes the production, distribution and consumption of
leaf tobacco,
smoking products such as cigarettes and beedi and
Various chewing tobacco products.
It presents policy-makers with an unenviable dilemma. On the one hand, it is a robust and
largely irrigation-independent crop, provides substantial employment, has significant export
potential and most importantly, is a source of ever-growing tax revenues. On the other, there
are public health concerns about the effects of smoking and consumer-led lobbies asking for
more controls on cigarette sales, smoking and advertising. In spite of its proven adverse
implications for public health, the industry continues to be supported in many quarters on the
grounds of its contribution to employment and national production. The organized sector of
the industry, dominated by multinational corporations, is at the forefront of canvassing support
for the sector.
1.2.1 Economic history of Indian tobacco industry
The immediate and tangible benefits that accrue from tobacco cultivation, manufacture and
marketing act as incentives for farmers to grow tobacco and for the government to encourage
tobacco cultivation and manufacture.
Tobacco has developed from a commodity to which great importance and value were attached
(because of its presumed medicinal and evident intoxicant properties), and hence used for barter
trade during the sixteenth and seventeenth centuries, to a cash crop in subsequent periods. The
following aspects of tobacco can help in understanding why it has developed as a cash crop:
1. Tobacco has been contributing substantially to the total agricultural income.
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2. It yields high net returns per unit of cultivation as compared to other crops.
3. It provides employment opportunities, both in agriculture and activities involved in the
manufacture of tobacco products.
4. It is a major foreign exchange earner.
5. It is an important source of revenue, which can be tapped relatively more easily than
many other commodities. In view of its special qualities, a levy on it does not
cause marked substitution effects and what the noted fiscal expert, Richard
Musgrave terms the spite effects’.35 Therefore, in practically every fiscal budget in
India, the finance minister proposes raising a levy on tobacco products and justifies it
on the ground that tobacco consumption is injurious to health.
6. There is considerable domestic and inter- national demand for tobacco and its products.
The historical developments relating to the economic aspects of tobacco in India can be
studied in two periods: the colonial era before India became independent in 1947 and the
post- Independence period of national governance and policy-making.
Pre independence period
Tobacco was initially grown in the Deccan region (South Central India), during 1605,
and l a t e r spread to other parts . The Virginia variety of tobacco was introduced in India
in Andhra Pradesh in 1920 by the British officers of the Indian Leaf Tobacco
Development Company. Sir Forbes Watson’s Cultivation and preparation of tobacco
in India (1871), said to be one of the earliest publications on tobacco, tells us more about
Indian tobacco.
The area under tobacco cultivation increased three times during the period from
1891–1892 to 1920–1921. Since then, the area under tobacco cultivation has been hovering
around four lakh hectares. There was a great demand for tobacco, particularly cigarettes, by
1920. Since cigarettes were not manufactured in India, imports increased to meet the domestic
demand. Revenue from tobacco increased six times, while the value of imports increased 26
times during a period of 40 years.
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Post independence period
Although tobacco was grown in many parts of India during the 1950s, the best
quality crop was grown in Bihar, West Bengal, Tamil Nadu, Karnataka, Maharashtra,
Punjab and Andhra Pradesh. Cultivation of flue-cured Virginia (FCV) tobacco spread to
Tamil Nadu (1957–1958), Maharashtra (1961–1962) and West Benga l ( 1966). Till
the1960s, the cultivation of FCV tobacco was traditionally confined to the black soils in
India. However, with increasing demand for light- bodied leaves and low n ico t ine /tar
content, its cultivation was extended to Karnataka’s light soils. Madras (now Chennai)
was leading in the area under tobacco cultivation until the formation of Andhra Pradesh in
1953. West Bengal was also one of the leading producers before 1947.
The area under tobacco cultivation increased within the first 20 years of Independence. There
was a steep reduction in the area in 1975–1976, by 1980–1981, the area under cultivation
increased by 22%. This increase was the result of initial efforts taken by the Tobacco Board set
up in 1975. The reduction in crop area, observed in 2001, was due to a crop holiday observed in
Andhra Pradesh. This was in response to an unsold surplus of tobacco produce from the
preceding years. These fluctuations have occurred only in the tobacco growing regions of India.
Overall, the area under cultivation has been limited to four lakh hectares, because of the non-
suitability of the soil for tobacco cultivation in other parts of India.
From 1951 to 2001, there was an increase in the production by 130%, in excise revenue by
31,614%, in export revenue by 5823% and in consumption by 92%. The worldwide trend in the
area of tobacco cultivation and production shows that while there has been a relatively
modest growth in the area under tobacco cultivation, a steady growth in the production area
has taken place, pointing to substantial productivity gains. There has also been a shift in
tobacco production from the developed to developing countries. India’s share in the world
tobacco production was 10.2% in 2000, while that of China was 36.7%. However, in terms of
productivity, India has always remained much below the world average by 20%–40%. An
analysis of variety-wise tobacco production reveals that the bulk of total tobacco production in
India consists of non-cigarette tobacco products as there is a strong, but unorganized, domestic
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market for non-cigarette tobacco products. Production of cigarette tobacco, mainly FCV,
though increasing, still accounts for only 30% of the total production in the country. This is
because of the 200 million tobacco consumers in India, only 13% consume it in the form of
cigarettes, while 54% consume it in the form of beedi and the rest in raw/ gutka forms.43
Worldwide, 85% of the tobacco cultivated is used in the production of cigarettes. Hence, the
tobacco consumption pattern in India markedly differs from the rest of the world in terms of
product configuration.
A special feature of the domestic tobacco production scene in India is the varietal composition of
the produce. India is the only country where the bulk of production consists of numerous non-
smoking types of tobacco. The presence of a strong domestic demand for beedi, hookah, and
chewing and snuff tobacco necessitates the cultivation of non-cigarette types of tobacco to a
relatively large extent. An analysis of variety- wise production of tobacco shows that during
1997–1998, beedi accounted for 29.6% of the total area under tobacco cultivation and 29.5%
of the total production, whereas Virginia tobacco used in cigarettes was grown on 39.1% of
the area under tobacco cultivation and accounted for 23.6% of the total production. However,
the share of chewing tobacco in India’s tobacco production has risen steadily over the years from
11.7% in 1993–1994 to 29.1% in 1997–1998.
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Chapter 2
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2.1 Market Scenario of Indian Tobacco Industry
The Indian tobacco industry is divided into three distinct and powerful sectors: bidis (smoking
products hand- rolled in tendu leaves), smokeless tobacco (mainly chewing tobacco) and
cigarettes. Bidis are most popular tobacco products consumed in India – 48 % of the market.
Smokeless tobacco makes up 38% and cigarettes only 14% of the market. Some aspect of the
tobacco industry, whether it be tobacco farming, manufacturing, or distribution, is present in
every Indian state, making tobacco control a truly national effort. This report, like the tobacco
industry in India, has sections on each of the tobacco sectors as well as examples of tobacco
promotion, sponsorship and corporate social responsibility efforts designed to increase
consumption and industry profits
Phases in Manufacture of Tobacco
1. Planting
2. Harvesting
3. Curing
4. Manufacture
1. Planting
Seed sown in nursery. Later transplanted after 6-8 inches tall. Soil is enriched and fertilized.
Pesticides are sprayed or crop is dusted. The plants grow 4-6 feet in height. The plant is
pruned of dead stems and leaves. Healthy plants have 9-20 leaves and are about 24-30 inches
length.
2. Harvesting
Harvesting after 70-90 days of transplanting with the
precaution of sun burn. Priming: The hand picking
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technique. Stalk cutting: Cutting close to the root. Separation of leaves for Cigar, Cigarettes
and Pipe Tobacco.
3. Curing of tobacco
Curing is a process of drying and removal of the
sap. It improves the aroma and heightens the
flavor.
• Methods of Curing
Flue Curing.
Air Curing.
Fire-curing
Sun Curing
Flue curing
In a barn Tiers of Poles hung lengthwise. Flues are ducts that carry heat pumped in at 170 * F
which makes the tobacco leaves dry and brittle. The process lasts 4-5 days. The leaves are
then separated as firsts, seconds and lugs depending on quality. The seconds form the bulk of
the production. The leaves are spread out on the floor and allowed to ferment for 3-4 weeks.
Flue cured tobacco is largely for cigarettes.
Air
The process uses air to cure the leaves. The leaves are placed on unsheltered platforms. The
barn has ventilators and temperature and humidity is controlled. Temperature of 65-75*F is
maintained. Under good conditions 4-5 days are good enough for the curing process to be
executed. Chewing tobacco is largely made using this method.
Fire
Fire cured tobacco is hung in large barns. or intermittent low
smolder and takes between here fires of hardwoods are kept on
continuous three days and ten weeks, depending on the process and
the tobacco. Fire curing produces a tobacco low in sugar and high in
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nicotine. Pipe tobacco, chewing tobacco,
and snuff are fire cured. Flavored tobacco
is also made the same way.
Sun
Sun-cured tobacco dries uncovered in the
sun. This method is used in Turkey, Greece and other Mediterranean countries to produce
oriental tobacco. Sun-cured tobacco is low in sugar and nicotine and is used in cigarettes
4. manufacturing
Freshly cured tobacco has a bitter and sharp aroma. Tobacco is stored in barrels for 2-3 years
before the manufacturing. During this some water is added to maintain the moisture content
and keeping the leaves brittle. This process makes the leaves sweeter and the flavor becomes
mild reducing the nicotine content. Flavorings can be added like honey, liquorices, menthol,
glycerin maybe added to moisten tobacco
2.2The Bidi Industry
Bidis are slim hand-rolled, unfiltered cigarettes that are rolled in brown tendu or temburni leaves
held together by a string. The product is often flavored, and in general bidis are stronger tasting
than regular cigarettes. Bidis are cheaper than cigarettes which makes them very popular in rural
areas and among the poor. While bidis are the number one tobacco product used in India, very
little is actually known about the organization of the bidi industry. Bidi production is fragmented
and because most brands are hand-rolled in individual homes on a small scale, the bidi industry
is considered to be a cottage industry.
In 1995 the Ministry of Statistics and Programme Implementation estimated there were
over 6,600 bidi manufacturers in India, compared to 40 cigarette factories and 55
smokeless tobacco factories. While recent numbers are not available, it is still clear that
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bidi manufacturers greatly outnumber other types of product manufacturers.
A woman sitting at home rolling 100 sticks a day qualifies as a bidi factory.
The bidi manufacturing industry is divided into two different sectors: organized and
unorganized. The organized sector is factory based and production is increasingly mechanized;
and the unorganized sector is made up of home-based production and small cooperatives. Most
production and hand-rolling is done at home by women and children.
Tobacco industry analyst, Euromonitor International, estimates that 20% of bidis
are produced in the organized sector and 80% in the unorganized sector.
Even organized factories tend to outsource production to individual homes.
Because the bidi industry is fragmented there are no specific figures on how many bidis are sold
or produced. It is estimated that 750 billion to 1.2 trillion sticks are produced annually.
According to Euromonitor International, the bidi industry in India is worth Rs200 billion
($4.1 billion USD).
Bidis are much cheaper than cigarettes and smokeless tobacco products due mainly to
unequal levels of taxation on the different products. Bidis cost between Rs2.50-5.00 for
25 sticks (less than one Rs per stick) whereas the leading brand of gukta costs Rs3-4 per
unit. The leading brand of cigarettes costs Rs 80-88 for 20 sticks (Rs4-4.4 per stick).
In 2009, Euromonitor reported that bidi volume sales were down 5% from the previous
year because of a ban on smoking in public places.
Despite being fragmented, the bidi industry still has a powerful voice in Indian politics which
keeps taxes on bidi products low and regulations lax. The major lobbying organization for bidis
is the All India Bidi Federation which represents the entire bidi industry. Other organizations that
lobby nationally and regionally for the bidi industry include:
• All India Beedi, Cigar & Tobacco Workers Federation (New Delhi)
• Karnataka State Beedi Workers’ Federation
• S.K.Beedi Workers Federation
• Karnataka Beedi Industry Association
• Mumbai Beedi Workers Union (Maharashtra)
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• All Bengali Beedi Workers’ and Employees Federation (Calcutta)
According to Euromonitor International, no single bidi company or brand has more than a 5%
market claim.
• Large bidi producers have their own territory (state or district) where they dominate the
market with little competition from other bidi companies.
• There are a few regional players that sell their bidi brands in more than one state or
district, including Ganesh Beedi Works, Kajah Beedi Co and Bharat Bidi Works.
• There is no national bidi brand and at one time it was estimated that there were over 300
different brands across India. Some notable brands include:
502 Pataka produced by Pataka Biri Manufacturing
501 Ganesh produced by Magalore Ganesh Beedi Works
Top regional brands such as Dinesh in South India, Taj in North India, and
Howrah in East and Northeast India.
• While bidi production is concentrated in the west and south of India, it has also been
estimated that each state has around 200 bidi manufactures.
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Table 2.1 Leading Bidi Companies and Brands
CompanyName
Location Production and Distribution PopularBrand (s)
Bharath BeediWorks
Mangalore • Produces 60 million bidis a day• Popular in North and West India• Part of the Bharath Group
Thirty BrandBeedies
Kerala DineshBeedi WorkersCooperative
Kerala • Produces 30 million bidis a day• Produces 1.8 billion bidis annually• 18 different societies (companies)• Market covers Kerala, Tamil
Nadu and Karnataka• Cooperative is sponsored by the
Kerala government and includes bidi rolling, food processing, umbrella assembling, clothing and IT
KeralaDinesh Beedi
Mangalore Ganesh Beedi Works
Tamil NaduKarnataka
• Produces 20 billion bidis annually• Claims to produces 30% of the
bidis in the organized sector• Network of 30 branches
501
Pataka BiriManufacturingCo Ltd
Delhi • Produces 100 million bidis a day• Has 10 factories (2004)
502 PatakaBiri
Rajah Group(Kajah BeediGroup)
Tamil NaduKeralaMaharashtra
• Cooperative of four different companies
Kajah BeediAction Beedi
(Source 2010 Euromonitor International)
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2.3Smokeless Tobacco
Popular among rural and urban consumer, smokeless tobacco is also much more popular among
woman than smoking. The smokeless industry in India is highly fragmented - some products are
commercially manufactured but many are made in the home and sold locally. Smokeless tobacco
products in India include khaini, gutka, mawa, gudhaku, and zarda.
Table 2.2 Types of Smokeless Tobacco
Type of Smokeless Tobacco Description
Khaini/ Kharra Mixture of sun-dried tobacco and lime.
Gutka (Gutkha) A dry mixture of crushed areca nut, tobacco, catechu
(spices), lime, aromas and flavourings as well as other
additives.Pan Masala General term for areca nut product. Does not usually
contain tobacco and is often confused with Gutka.Mawa Uses shavings of areca nut, tobacco and lime.
Gudhaku A paste made of tobacco and molasses.
Zarda Raw tobacco that is scented using spices such as saffron.
(Source 2010 Euromonitor International)
Another product, pan masala, is often confused with gutka because it is packaged the same but it
does not contain tobacco.
In a recent Global Adult Tobacco Survey, it was reported that khaini is the most commonly used
tobacco product in India, followed by gutka. However, according to Euromonitor International,
Gutka is the most popular form of chewing tobacco sold in India and is estimated to account for
approximately 80% of chewing tobacco total volume sales. This discrepancy is mainly a
difference between actual prevalence of use and what Euromonitor International is able to
measure in terms of volume. More people in India report using khaini, but gutka companies such
as Dharwal Industries are larger and more organized and therefore more likely to report product
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sales. In general, smokeless tobacco products are very cheap and are sold in single use packets
for Rs1-3 (less than one cent US).Unbranded smokeless products, including unbranded khaini,,
are common, keeping the products cheap and unregulated.
In India, retail volume sales of smokeless tobacco products increased by 82% between 1999 and
2009.After a 2008 smoking ban and tax increase on unfiltered cigarettes, chewing tobacco sales
increased by 6.5% as low-income smokers switched to cheaper smokeless products.
Table 2.3 India Smokeless Tobacco Market Size - Retail Volume (’000- Tonnes)
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009352 380.1 404.8 425.1 454.8 484.4 506.2 539.1 566 600 639
(Source 2010 Euromonitor International)
Leading Companies and Popular Brands
The smokeless tobacco industry in India is controlled by a few large national companies and
many different regional players. The top five companies account for 31% of sales, the rest is
controlled by regional players that often only operate in one district in a state. In general, Indian
smokeless tobacco users prefer to buy locally.
Table 2.4 Smokeless Tobacco Company Shares Retail Volume (%)
Smokeless Tobacco Company Shares Retail Volume (%)
Company Name 2003 2004 2005 2006 2007 2008 2009
Dhariwal Industries Ltd
(Manikchand Group)
11.8 12 12 12.3 12.3 12.5 12.5
Dharampal Satyapal Ltd
(DS Group)
8.8 9.3 9.5 8.8 7.8 7 7.2
Som Sugandh Industries Ltd 4.3 4.2 4 4.7 5 5.5 6
Shree Meenakshi Food
Products Pvt Ltd
2.5 2.8 2.8 3 3 3.2 3.5
Kothari Products Ltd 4.2 4.3 4.3 4 3.5 2.8 2
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Others 68.4 67.4 67.4 67.2 68.4 69 68.8
(Source 2010 Euromonitor International)
Market Share of Top India Smokeless Brands ‐ Retail
Volume (%) Brand Company name
2009
RMD Gutkha Dhariwal Industries
12.5
Dilbagh Som Sugandh Industries 6
Tulsi Dharampal Satyapal
3.7
Baba Dharampal Satyapal
3.5
Goa Shree Meenakshi Food Products
3.5
Pan Parag Kothari Products
2
Most smokeless tobacco companies in India just produce one brand. Different flavour varieties
and packaging sizes are sold under the one brand name. The brand name is also often used to sell
a non-tobacco pan masala product. Uniting a tobacco product and non-tobacco product under one
name is a clever marketing technique, as India has an advertising ban in place that prevents the
direct advertising of tobacco products. Tobacco products that are packaged identically to pan
masala benefit from the association made between the two products.
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Dhariwal Industries-
As one of the oldest smokeless tobacco companies in India, it is also currently the market
leader.The company is part of the Manikchand Group which also has interests in packaging,
bottled water, power and real estate among other things.
• Dhariwal Industries manufactures its products in Vadodara, Pune and Bangalore.
• Dhariwal Industries produces gutka under the brand name RMD which is the number one
seller in India. The company also uses the RMD name for pan masala.
Dharampal Satyapal-
The second largest smokeless tobacco company in India. Dharampal Satyapal is part of the DS
Group which also has interests in food and beverages, packaging, hospitality and hospitality
industries, among others.
• The DS Group manufactures tobacco products in Agartala, Tripura.
• Produces two smokeless tobacco brands- Tulsi (gutka) and Baba (zarda). Also produces
pan masala under the Baba name.
Som Sugandh Industries-
Also known as the Dilbagh group, the company is the third largest smokeless tobacco company
in India.
• The Dilbagh Group is based in New Delhi.
• The company produces three smokeless tobacco products- the second most popular
Dilbagh brand (gutka), Talab (gutka) and Hot (khaini). All three brands are also used to
sell pan masala.
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Talab Gutkha in particular is packaged “in attractive sachets” making it a “hot favourite
among youth across all income groups.”
Kothari Products-
Also known as Pan Parag India, and was established in 1973.
• Most visible product is the Pan Parag brand which is used to sell gutka bu whose main
product is pan masala.
2.4The Cigarette Industry
Cigarette consumption makes up a small portion of the tobacco market in India, only 14% of
tobacco products sold are cigarettes. Retail volume sales have decreased by 9% in the last ten
years from 99.6 billion sticks in 1999 to 90.3 billion sticks in 2009. Recent declines in cigarette
volumes are mainly due to a 2008 increase in the tax on unfiltered cigarettes. The tax increase
has also led to many unfiltered brands being removed from the market. ITC Ltd stopped
unfiltered cigarette production entirely and some companies have launched filter versions of their
most popular unfiltered brands to maintain their customers.
Table 2.5 India Cigarette Market Size- Retail Volume (billion sticks)
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 200999.6 98.7 89.3 91.9 94.5 96.5 100 101.1 99.8 91.2 90.3
(Source 2010 Euromonitor International)
Despite recent declines in sales, it is expected that cigarette use will increase overtime as
disposable incomes increase in India. Euromonitor International predicted in 2008 that if the
smokers who currently smoke bidis switched to factory made cigarettes, then India’s cigarette
consumption would increase to around 640 billion sticks. This increase would make India the
second largest volume cigarette consumer in the world behind China.
Table 2.6 Cigarette Company Shares Retail Volume (%)
Cigarette Company Shares Retail Volume (%)
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2003 2004 2005 2006 2007 2008 2009ITC Group 66 66.1 67.5 67.8 67.9 71.8 72.9Godfrey Phillips India Ltd 10.9 11.9 11.1 11.5 11.9 12.9 13.8VST Industries Ltd 9.4 8.9 8.7 8.4 8.5 8.5 8.7Golden Tobacco Ltd ‐ ‐ ‐ ‐ ‐ 3.6 1.5GTC Industries Ltd 9.4 9.4 9.2 9 8.6 ‐ ‐Japan Tobacco Inc ‐ ‐ ‐ ‐ 1.3 1.4 1.3Gallaher Group Plc** 2 1.5 1.4 1.3 ‐ ‐ ‐Others 2.2 2.2 2.2 1.9 1.8 1.9 1.7 Total 100 100 100 100 100 100 100
(Source 2010 Euromonitor International)
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The cigarette market in India is controlled by four locally established companies, but most
companies also have close ties to international tobacco companies. The leading transnational
tobacco companies (TTC) have recently attempted to increase their shares of the Indian cigarette
market but have had little success. The ability of TTCs to increase their presence in India has in
part been limited because of restrictions on foreign direct investment (FDI) in cigarette
manufacturing.
ITC Group-
ITC was established in 1910 under the name Imperial Tobacco Company of India. The company
changed its name to ITC in 2001 to reflect its diverse interest in products outside of tobacco.
• ITC is the leading cigarette manufacturer in India with 73% of the market in 2009. Since
2001, ITC has steadily increased its market share in India and has increased cigarette
production by 15% from 57.1 billion sticks in 2001 to 65.8 billion sticks in 2009.
• Reportedly, the Indian government has a stake in ITC. While ITC claims that the state
does not have any direct shares, the company does report that a large number of ITC
shares are held by financial institutions which are majority state owned such as the Life
Assurance Corporation of India and Unit Trust of India.
• The TTC British American Tobacco (BAT) has also has a 32% share.
• ITC generated RS 262.6 billion ($US 28.9 million) in revenue in 2009 through its interest
in cigarettes, hotels, cosmetics and toiletries, packaged food, apparel, paperboards and
packaging, and agriculture.
ITC’s cigarette industry contributed to 66% of the company’s total revenue for the
fiscal year ending March 2010.
• ITC has five cigarette factories in Bangalore, Kolkata, Munger, Ranjangaon, and
Saharanpur.
• In addition to its operations in India, ITC also has cigarette subsidiary Surya Nepal,
which is a joint venture with British American Tobacco.
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Godfrey Phillips India-
Established in India in 1936 as an import company for Godfrey Phillips, UK. The company has
since established itself as a major local manufacture of cigarettes in India.
• Godfrey Phillips is the second largest cigarette company in India with 14% of the market.
• Since 2001, the company has seen continuous growth in market share and has increased
its cigarette production by 43% from 8.7 billion sticks in 2001 to 12.5 billion sticks in
2009.
• Godfrey Phillips India has two major stake holders - the KK Modi Group, an industrial
conglomerate based in Mumbai, and the international tobacco company Philip Morris
International (PMI) which together hold a total of 71% of the company. In May 2009,
KK Modi acquired an additional 10.8% stake in Godfrey Phillips from PMI, bringing its
total share to 47% and PMI’s to 25%.
• Godfrey Phillips India has a leaf division that provided tobacco leaf for production in-
country and for export. The company also sells tea.
• The cigarette segment accounted for 92% of Godfrey Phillips India revenue for the
financial year ending March 2010.
• Godfrey Phillips is headquartered in New Delhi and has factories in Ghaziabad (near
Delhi) and Andheri (near Mumbai). Currently, a new factory is being built in Rabale.
• The company has a strong presence in North and West India, and in an attempt to
increase the company’s reach in India, Godfrey Phillips is aggressively expanding
distribution into the states of Tamil Nadu and Orissa.
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VST Industries-
Established in 1930. Before the company changed its name to VST Industries in 1984, it was
known as the Vazir Sultan Tobacco Co.
• VST Industries is the third largest cigarette company in India with 9% of the market.
Between 2001 and 2009 the company lost market positioning and saw a 28% decrease in
volume sales.
Since 2008, declines in growth have reversed. VST Industries reported a 4.5%
increase in volume production for the fiscal year ending in March 2010, as well
as record profits.
• VST Industries is an affiliate of BAT, which holds a 32% stake in the company.
• The company sells economy priced cigarettes, and has a strong presence in South India.
Besides cigarettes, VST Industries also sells unmanufactured and cut
tobacco leaf.
• VST Industries has a manufacturing facility located in Andhar
Golden Tobacco-
Established in India in 1930 as the first wholly-owned Indian tobacco company in the country.
Formally known as GTC Industries, renamed Golden Tobacco after demerging from its retail
business in 2008.
• Golden Tobacco is the fourth largest cigarette company in India with 1% of the market.
In 2001, the company controlled 10% of the cigarette market but saw a dramatic decline
in market share and production in 2008 after the tax increase on unfiltered cigarettes.
• In 1979, the company was acquired by Dalmia Group which also has interests in
telecommunications, chemicals, and textiles. The Dalmia group holds a 36% share of the
company.
• The company has two major production facilities in Mumbai and Baroda.
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Transnational Tobacco Companies (TTC) Presence in I n dia
The expansion of TTC in India has been limited by restrictions on FDI by cigarette companies in
the country. However, as described previously, three of the top international tobacco companies
currently have stakes in local manufactures. Despite restrictions, TTC’s continue to focus on
India because of the potential growth of the cigarette market.
British American Tobacco (BAT) –
BAT is a British company headquartered in London, England. BAT is ranked third in the global
tobacco market.
• BAT is a stakeholder in ITC and VST Industries and owns approximately 32% of each
tobacco company.
• BAT attempted to increase its stake in ITC from 32% to 51% but the company has been
prevented from doing so by the Indian government and restrictions on FDI.
Philip Morris International (PMI) –
PMI is a U.S. company with headquarters in Lausanne, Switzerland. PMI is ranked second in the
global tobacco market behind China National Tobacco Company.
• PMI currently owns a 25% stake in Godfrey Phillips India after selling part of its shares
to KK Modi in 2009.
• In 2009, after years of trying to get approval to independently manufacture Marlboro
cigarettes in India, PMI allowed production of its most popular brand to start under the
supervision of Godfrey Phillips.
Japan Tobacco International (JTI) –
The country of Japan is the majority shareholder in JTI and the company is headquartered in
Geneva, Switzerland. JTI is ranked fourth in the global tobacco market.
• JTI currently holds a 50% stake in JTI India, a joint venture with a Mumbai-based law
firm, the Thakkar family.
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Brand Company name 2010Gold Flake ITC Group 31.2
Wills ITC Group 18.2
Scissors ITC Group 8.4
Four Square Godfrey Phillips India Ltd 7.9
Capstan ITC Group 7.4
Bristol ITC Group 6.9
Charminar VST Industries Ltd 4
Red & White Godfrey Phillips India Ltd 3
Charms VST Industries Ltd 3
Cavenders Godfrey Phillips India Ltd 2.5
• JTI has been working since 2008 to increase its stake in its Indian unit from 50% to 74%
but was prevented from doing so by the Foreign Investment Promotion board. In early
2010, JTI invested $65 million USD in its India unit just days before the Indian
government decision to ban FDI in cigarette manufacturing.
• JTI is affiliated with ITC through the manufacturing of Berkley cigarettes, which makes
up 1.3% of the Indian cigarette market. Although JTI is the global brand owner of
Berkley, the brand is manufactured in India by ITC.
Leading Cigarette Brands Promoted in India
Cigarette companies aggressively advertise their brands in order to attract new smokers and to
encourage current smokers to switch brands. From March 2009 to March 2010, cigarette leader
ITC spent 5.1 billion Rs ($114.7 million USD) on advertising and promotion. According to
Euromonitor International, cigarette companies are focusing on targeting young urban consumers
and middle-upper income consumers. Companies are also shifting brands away from unfiltered
variants to filtered variants. In 2009, local brand Gold Flake had the largest cigarette market
share in India (31%), followed by Wills (18%) and Scissors (8%) - all of which are owned by
ITC Group.
Table 2.7 Market Share of Top Ten India Cigarette Brands Retail Volume (%)
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(Source 2010 Euromonitor International)
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Table 2.8 Ownership of Major Local Brands
Company Major Brands
ITC Group Gold Flake (1), Wills (2), Scissors (3),
Capstan (5), Bristol (6), Classic, Silk Cut,
Navy Cut, India Kings, Insignia, Flake
Godfrey Philips India Four Square (4), Red & White (8),
Cavenders (10), Tipper, Stellar, I-gen,
Jaisalmer, North Pole
VST Industries Charminar (7), Charms (9),
Golden Tobacco Panama, Chancellor, Golden, Taj Chap,
Style Mini Kings, Steel, June, Just Black,
Lips, Diet Blue
Numbers refer to the brand’s market position by retail volume in 2010
(Source 2010 Euromonitor International)
While global cigarette brands are sold in India, the government severely restricts in country
production of these brands. Besides Marlboro, other international brands sold in India include
BAT’s Benson & Hedges and JTI’s Winston brands.
Slim cigarettes targeting women
Although the female smoking population is currently very small (about 3%), cigarette companies
in India see the potential for growth by attracting women. Since 2007, slim cigarette brands have
been launched to appeal to women smokers.
• The first slim cigarette to hit the Indian market was the Stellar Slims brand by Godfrey
Phillips in 2007. The brand is marketed as having lower levels of nicotine with the
satisfaction of a regular cigarette.
• In 2008, ITC Group launched Wills Classic Verve slim
cigarettes targeted at women and first time smokers. ITC
describes the brand packaged in a shiny red as “India’s trend
setting cigarette…[that] defines ubercool urban style.”
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• Golden Tobacco also has a slim cigarette called June.
Targeting health conscious consumers with misleading claims
As Indian customers become more aware of the health risks associated with tobacco use,
cigarette companies have created new products and tactics to counteract consumer knowledge.
One such tactic is to use misleading terms (ex “low-tar”) on cigarette packaging or in
advertisements that encourage health- concerned smokers to switch to cigarettes brands that they
perceive as safer. This also offers consumers that are concerned about health risks from tobacco
an alternative to quiting. As of 2006, India prohibits tobacco product packaging and labeling
from containing information that is “false, misleading or deceptive,” or that is likely to create
misperceptions about the characteristics or heath effects of tobacco products. This includes
prohibiting the use of terms such as “light”, “mild” and “low-tar”. Despite these restrictions,
cigarette brands are still misleadingly marketed as being healthier.
Loe Tobac cigarettes launched by Golden Tobacco in 2006 claim to contain 50% less tobacco
than regular cigarettes. Golden Tobacco also claimed that ‘LoeTobac has been found to have
“safer delivery levels” of tar, carbon monoxide and tobacco- specific nitrosamines than other
brands.
• Golden Tobacco markets Diet Blue cigarettes which use “ECOTINE technology and is
low in TSNA [so that it] does less damage to smokers.” On the company website, Diet
Blues are also described as having almost zero carcinogens making them “the safer
option for existing habitual smokers.”
• According to Euromonitor International, ITC plans to peruse creating “less harmful
cigarettes” and is expected to promote mid and low tar cigarettes towards consumers in
the future.
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Brands that appeal to young tech-savvy smokers.
India has a very large technology industry and a growing
information technology culture. Cigarette companies are capitalizing
on the technology trend by introducing premium brands that appeal to younger consumers.
• Godfrey Phillips launched I-gen in 2006. I-gen cigarettes have a black filter and the
black, red and silver packaging is “aimed at making the product look trendy and
contemporary.” The brand is descried on the company’s website as a cigarette that “holds
the promise cigarette quality and immense style.”
• In 2005, Golden Tobacco launched Chancellor XP. XP refers to the Windows operating
system and the brand is designed to appeal to India’s information technology workers.
Essential Facts
The tobacco industry spends billions of dollars each year to market its products. The industry
uses a mix of advertising, promotion and sponsorship tactics to directly affect tobacco use and
attitudes related to tobacco. Tobacco advertising, promotion and sponsorship:
Promote tobacco use as customary and glamorous.
Are deceptive and misleading.
Weaken public health campaigns.
Target specific populations such as women, youth, and minority groups
Increase tobacco consumption by:
Attracting new tobacco users.
Increasing the amount of consumption among current smokers.
Reducing a smoker’s willingness to quit.
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Encouraging former smokers to start smoking again.
Through advertising of its products, the tobacco industry tries to create an environment in which
tobacco use is familiar and socially acceptable, and the warnings about its health consequences
are undermined.
Comprehensive bans reduce Tobacco Use
Comprehensive bans, which prohibit the use of all marketing strategies by the tobacco industry,
reduce tobacco use among people of all income and educational levels. Partial advertising bans
are less effective, in part, because the tobacco industry switches its marketing efforts to
unrestricted outlets when bans are not comprehensive.
A study of 22 developed countries found that comprehensive bans reduced tobacco
consumption by 6.3%.
A study of 102 countries showed that in countries with partial bans consumption only
decreased by 1% compared with almost 9% in countries with comprehensive bans.
A study of 30 developing countries found partial bans were associated with a 13.6%
reduction in per capita consumption, compared to 23.5% in countries with comprehensive
bans.
The World health organization (WHO) Framework convention on Tobacco control (FCTC) requires comprehensive bans
The FCTC, the world’s first global public health treaty, establishes a policy framework aimed to
reduce the devastating health, economic, and social impacts of tobacco. The FCTC requires
Parties to implement and enforce a comprehensive ban on tobacco advertising, promotion and
sponsorship within five years of ratifying the FCTC.
Tobacco advertising and promotion is defined in the FCTC as “any form of commercial
communication, recommendation or action with the aim, effect or likely effect of promoting a
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tobacco product either directly or indirectly.
Examples include:
Broadcast, print and outdoor advertising.
Point of sale advertising.
Various sales and /or distribution arrangements with retailers for
Product placement, sales promotions and discounts.
Product packaging.
Advertising on the Internet.
Use of tobacco brand names, logos, or visual brand identities on non- tobacco products,
activities, or events.
Placement of tobacco products or tobacco use in the entertainment media.
Sponsorship is defined in the FCTC, as “any form of contribution to any event, activity or
individual with aim, effect or likely effect of promoting a tobacco product or tobacco use either
directly or indirectly.”
Examples include:
Sports
Cultural events.
Concerts.
School programs.
Corporate social responsibility activities such as youth prevention initiatives and
charitable contributions to public and private organization.
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2.5Tobacco Industry Promotion and Sponsorship
The tobacco industry engages in a comprehensive marketing strategy to create the impression
that tobacco use is widespread and acceptable. These strategies include direct advertising (ads on
TV or in magazines and at point of sale) and indirect advertising such as sponsorship of sports
and concerts, product placement, and brand stretching. In India, despite an advertising ban
having passed in 2003, cigarette companies in particular consistently exploited loopholes in the
law and relaxed enforcement to market their products and attract new users. Examples include:
• In 2010, Godfrey Phillips India broke into the Indian chewing industry with the launch of
Pan Vilas, a premium pan masala brand, and planned to invest Rs 1 billion ($US 22
million) over three years on marketing the product. Nita Kapoor, vice president of
marketing and corporate affairs said in reference to promoting Pan Vilas that the
company would “push this product aggressively to penetrate deeper in the market.”
Considering recent declines in cigarettes sales, the successful marketing of a pan masala
brand will allow Godfrey Phillips easier access to the smokeless tobacco market. The
company plans to launch a zarda product by the end of 2011.
• The ITC group uses two of its popular cigarette brands, Wills and John Player, as the
brand name of lifestyle retailing stores that sell clothing. The Wills Lifestyle brand is a
well-established brand and also sponsors India’s annual Fashion Week, stretching the
cigarette brand name so that it is associated with the glamour of fashion and not just the
deadly tobacco product.
• In 2009, 700 buses in Mumbai carried pan masala advertisements. While advertising non-
tobacco pan masala products is not illegal in India, their presence on buses is considered
surrogate advertisement for tobacco products because the same brand name and
packaging exists for both pan masala and chewing tobacco products.
• The advertising ban in India is not strictly enforced and tobacco companies take
advantage by promoting their products in ways that are illegal. In 2009, Four Square, a
popular Godfrey Phillips India brand, sponsored a concert series and talent contest in the
city of Channai. The event titled “Four Square- GET FAMOUS- be Tamil Nadu’s Next
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Singing Sensation” was heavily promoted through limited edition cigarette packs, large
billboards, point of sales displays and contest entry locations across the city.
2.6 Corporate Social Responsibility (CSR)
Tobacco companies maintain CSR programs in an effort to counter negative attention regarding
their deadly business. This practice is particularly prevalent in India. By donating funds to noble
causes, the perception of cigarette companies by the public and policy makers improves. The true
goals of industry-sponsored programs have been revealed through internal tobacco industry
memos released to the public by U.S. legal settlements. CSR programs:
Serve the industry’s political interests by preventing effective tobacco control legislation.
Marginalize public health advocates.
Preserve the industry’s access to youth.
Create allies and preserve influence among policymaking and regulatory bodies.
Defuse opposition from parents and educators.
Bolster industry credibility.
In India, cigarette companies integrate themselves into local communities that they operate in
through CSR activities. They also work nationally to create goodwill with the public and policy
makers in an attempt to protect their profits.
Since 1990 Godfrey Phillips India has sponsored the Bravery Awards (first under the
brand name Red and White and now under the company name). The Bravery Awards
annually honors citizens that perform physical and social acts of bravery. Indian film
actress Preity Zinta acted as an ambassador of the awards from 2006-08. The awards
have also launched blood drives and the Amodini-Women's Empowerment initiative.
In 2000, the ITC launched e-Choupal, an IT training program for Indian framers. The
program claims to reach over 4 million farming families, connecting them to a digital
infrastructure that enables them to link to a more formal market. ITC also supports
primary education, women empowerment and environmental initiatives.
34
Smokeless tobacco companies are also known to use CSR tactics in the communities
that they operate in.
The DS Group, which includes Dharampal Satyapal, contributes to a wide range of
social issues in Assam and Tripura. Activities include the renovation of Pallimangal
H.S. School and contributions to economic development projects of ethnic and tribal
groups in North Eastern States.
The tobacco industry in India is complex and powerful. Knowing where and how the industry
operates is essential to creating and advocating for strong tobacco control policies. Unless strong
tobacco control regulations are put in place and enforced in India, the tobacco industry will
continue to expand and profit from addicting consumers to its deadly products.
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Chapter 3
36
3.1 Research methodology
Objective of the Study
The different objectives of our study of Indian tobacco industry are as given below.
To study the tobacco industry in India
To study the external environment factor affecting to Indian tobacco industry.
To study current trend in Indian tobacco industry.
To analyze the competitive scenario of the Indian tobacco industry
To analyze the financial scenario and position of the Indian tobacco industry.
Research Design
Exploratory research design
Exploratory research design is used for finding variables & understanding the topic of
research.
Types of Data
Secondary data
Secondary data is collected for the purpose of getting idea about Indian tobacco industry. This
entire project report is based on secondary data so we will collect the data from the secondary
data sources. These sources are as given below.
Web sites
Books
Magazines
Journals etc.
We will not go for the primary data analysis so we do not require conducting a field work and
we will also need not to meet people personally for collection of data.
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3.2PESTELC Analysis - Tobacco industry in India
PEST analysis of any industry sector investigates the important factors that are affecting the
industry and influencing the companies operating in that sector. PEST is an acronym for
political, economic, social and technological analysis. Political factors include government
policies relating to the industry, tax policies, laws and regulations, trade restrictions and tariffs
etc. The economic factors relate to changes in the wider economy such as economic growth,
interest rates, exchange rates and inflation rate, etc. Social factors often look at the cultural
aspects and include health consciousness, population growth rate, age distribution, changes in
tastes and buying patterns, etc. The technological factors relate to the application of new
inventions and ideas such as R&D activity, automation, technology incentives and the rate of
technological change.
PEST Analysis is a perfect tool for managers and policy makers; helping them in analyzing the
forces that are driving their industry and how these factors will influence their businesses and the
whole industry in general. Our product also presents a brief profile of the industry comprising of
current market, competition in it and future prospects of that sector.
Political Analysis
The cigarette industry in India continues to operate in a challenging economic environment,
particularly with respect to taxation and regulations relating to communication and consumption.
The regulations, dictated by circumstances in more developed markets, together with prolonged
punitive and discriminatory taxation have had the effect of being directed almost exclusively at
cigarettes, thereby stifling cigarette consumption in India in comparison with other forms of
tobacco consumption.
High rates of taxes on cigarettes, in excess of 130% of the net value of the product, have
rendered cigarettes unaffordable to the majority of tobacco consumers in the country. Apart from
the adverse impact on the Exchequer, the reducing base of domestic cigarette consumption
38
discourages investment in R&D and quality enhancement of tobacco varieties and thereby
undermines the export potential of high value Indian cigarette tobaccos. It is estimated that
contraband cigarette trade in India sets the country back by nearly Rs.2000 crores annually
through loss of tax revenue and unaccounted outflow of foreign exchange.
The Cigarettes and Other Tobacco Products (Prohibition of Advertisement and Regulation of
Trade and Commerce, Production, Supply and Distribution) Act, 2003, (COTPA) is being
implemented in a phased manner with effect from 1st May 2004.
Economical Analysis
India is a major grower and exporter of tobacco in the world. Presently India is among top three
producers of tobacco in the world. Despite lower proportion of total produce being exported
Indian exports it figures among top 10 exporters of the product in the world. Presently of the
total tobacco produce in India, only 50% is used in the domestic market and of this domestic
consumption of tobacco only 16% is used by cigarette industry.
It is estimated that over 2.3 million persons depended on this sector for their livelihood. The
annual wage bill in these enterprises averaged Rs 4 300 million, and annual wages per worker
varied from Rs 8 400 in bidi factories to Rs 55 730 in cigarette, cigar and cheroot factories. The
total net value added by all enterprises averaged Rs 15 000 million per annum, of which bidi
factories contributed 41.2 percent, and cigarette and allied industries 34.3 percent. The total
annual wage bill in the cigarette and allied industries, despite wages per worker being
substantially higher, was only 4 percent of its gross value of output, compared to 16 percent in
the bidi factories, because bidi manufacturing is more labour intensive. India is a major grower
and exporter of tobacco in the world. Presently India is among top three producers of tobacco in
the world. Despite lower proportion of total produce being exported Indian exports it figure
among top 10 exporters of the product in the world. Presently of the total tobacco produce
in India, only 50% is used in the domestic market and of this domestic consumption of tobacco
only 16% is used by cigarette industry.
39
On the average, cigarettes account for about 85% of tobacco consumption globally, with an even
higher share of almost 100% in large markets like China. In sharp contrast, cigarettes account for
shares have declined from 21% two decades ago to about 14% currently.
Social Analysis
Moderation in rates of taxes, coupled with the aspiration of tobacco consumers to upgrade
consumption, can multiply the share of cigarettes in India even in a shrinking basket of tobacco
consumption.
There is a growing public concern regarding increasing consumption of tobacco, its health
implications and the need to prevent access to minors and non-users. With a view to achieving
improvement of public health in general, the Government of India has banned the advertising of
cigarettes in India. This includes all forms of advertising like TV commercials, print ads,
pamphlets, hoardings etc. Also banned is the sale of cigarettes to any citizen below the age of 18.
Again, all forms of transaction involving tobacco products should be carried on with a label
displaying the harmful effects of its use. The label should be legible and prominent and
conspicuous as to size and color. All such restrictions by the government have made the
promotion of cigarettes almost impossible. It is mostly by word of mouth that the sales of
cigarettes have risen.
Technological Analysis
On the technological front, ITC cigarettes have came a long way and that can be concluded by
the fact that the supply chain management that the ITC employs now is of the latest trends- they
have a great inventory control, logistics support etc.
Environmental Analysis
Natural Environment-
40
The main source of raw materials for cigarettes is raw tobacco which is mainly found in the state
of Andhra Pradesh. There is no scarcity in supply of raw tobacco since the net income earned by
the farmers from cultivating tobacco has been found to be much higher than the net income
earned from other crops.
Region Environment-
The gap between urban and rural households in cigarette consumption is the highest in low and
lower-middle income households. Urban low and lower-middle income households consume
more cigarettes compared to the similar income groups in rural areas.
(Source 2010 Euromonitor International)
Tobacco Farming/Agriculture, Manufacturing
Tobacco in India is sown on medium black and light soils. The crop takes 6 to 7 months to
mature. It has a relatively short growing season, enabling farmers to cultivate other minor pulses
such as green gram, black gram and certain varieties of rice outside the tobacco-growing season.
Since tobacco is a short duration crop, the time lag between investment and returns is not long. It
is also a hardy crop and grows on light soil with little risk from weather, pests and diseases
making for fairly assured returns on investment. It is a labor-intensive crop in all three stages —
cultivation, harvesting and processing.
41
Price response and the assured market (contracts being typically entered into well before the
harvesting of the crop) play a significant role in the economics of tobacco cultivation. The
Tobacco Board serves as both a regulatory and a promotional body for Virginia tobacco. All
farmers seeking to cultivate the crop need to register with the Board and are allocated quotas for
Tobacco to be delivered to the auction platforms. The Board provides a minimum support price
and arrangements for auction of the output produced. All buyers too need to be registered with
the Board. Similar, though less rigorous support arrangements are operated by the Directorate of
Tobacco Development in coordination with the state departments of agriculture for other types of
tobacco.In addition to the above, the Central Tobacco Research Institute along with the Indian
Council of Agricultural Research have been active in developing strains with better quality and
higher yield, thus ensuring the sustainability and attractiveness of this crop to farmers.
Legal Analysis
The Cigarettes and Other Tobacco Products (Prohibition of Advertisement and Regulation of
Trade and Commerce, Production, Supply and Distribution) Act, 2003, (COTPA) is being
implemented in a phased manner with effect from 1st May 2004 along with the Ban on Smoking
in Public Places with effect from last quarter of 2008 resulting in a dip in sales and profit.
Potential Impact of Tobacco Tax Increases
Effects on Tobacco Consumption and Government Revenues
The effect of raising tobacco taxes on revenue and consumption in India. Annual consumption of
manufactured cigarettes in India is estimated to have been 107.5 billion sticks and the tax
revenue from cigarettes amounted to Rs 70.86 billion (US$ 1.56 billion based on an exchange
rate of Rs 45.3 per US$ in year 2006) in the financial year 2006-07.13 Assuming that tax is
collected on all cigarettes consumed (an assumption we examine below), this yields an average
tax of Rs 659 per 1000 sticks (Rs 13.18 per pack of 20). We compute a weighted average retail
price for cigarettes in India using data on prices of a set of most popular brands in different
categories from Sunley,13 supplemented with data on the fraction that each of those brands
represent in total cigarette consumption. For a representative cigarette, we calculate the excise
42
duty as a percent of retail price to be 38.3% and the retail price to be Rs 1.72 per stick (Rs 34.4
per pack of 20).
Taxes on bidis are very low, with a specific tax in the year 2007-08 of Rs 14 per 1000 sticks for
handmade bidis and Rs 26 per 1000 for machine-made bidis.13 Since handmade bidis constitute
more than 98% of bidis produced in India,13 Rs 14 is taken as the initial tax amount. Using the
ad valorem tax rate (8.8%) for bidis and the tax per stick, we impute a price for an average bidi
stick of Rs 0.16 (or Rs 4 per pack of 25 bidis). Annual consumption of manufactured bidis in
India is estimated to have been between 750 billion to 1.2 trillion sticks in 2007.
For the purpose of this simulation, we take the current consumption of bidis to be one trillion
sticks. Tax revenue collected from bidis in the year 2006-07 was Rs 4.3 billion. Significantly,
this figure is as much as 70% less than the potential revenue if taxes were collected on all bidis
consumed. The initial tax revenue for our simulation is taken to be Rs 14 billion — we assume
taxes are indeed collected on all bidis consumed. There is, in reality, wide-scale tax evasion in
the case of bidis—we assume otherwise here, for the purpose of simplicity.
Tax shocks (increases in tax as a percentage of the existing tax) are introduced, and changes in
consumption, expenditure and tax revenue are calculated using the price elasticities (rural and
urban price elasticities of –0.338 and –0.196 respectively for cigarettes, and rural and urban price
elasticities of –0.922 and –0.855 respectively for bidis). The effects are calculated separately for
rural and urban India using the corresponding elasticities and are later aggregated to obtain the
all-India results. Of the total cigarettes consumed, 43% are attributed to rural, and 57% to urban
households as estimated from the National Sample Survey (NSS) data. For bidis, the proportions
are 82% and 18% for rural and urban households, respectively.
Bidi taxes currently average 9% of retail price; revenues will continue to increase till bidi taxes
reach 40% of retail price, which would be equivalent to a 600% increase from the current level
of roughly 9% of the retail price. Specifically, the tax on bidis can be increased to Rs 98 per
1000 sticks as compared to the current Rs 14, with revenue increasing as the tax increases. At
that level, the average price of a pack of 25 bidis would be slightly more than Rs 6, or Rs 0.24
per stick, which would effectively mean a 53 percent increase from the current average retail
43
price of just under Rs 4 for 25 sticks, or Rs 0.16 per stick. An intuitive explanation for the
predicted patterns is that smokers cut back on consumption, though by a smaller proportion than
the tax-induced price increase. Smokers’ spending increases to a point, with increasing fractions
of that spending being diverted to tax revenues.
Revenue from higher taxes on cigarettes in the model increases until the total tax is about 78% of
the retail price, which effectively means that the tax can be increased to almost Rs 73.8 per pack
of 20 compared to the current Rs 13.18 per pack. Consumer expenditures and tax revenues on
cigarettes start declining only after the tax reaches at least Rs 3691 per 1000 sticks. Effectively,
this translates to a 176% increase from the current average retail price of cigarettes.
While the figures of a 600% increase in current taxes of bidis and 460% increase in tax of
cigarettes might seem drastic, the actual taxes in our projections only rise to 40% and 78% of
retail price of bidis and cigarettes respectively. Indeed, the Rupee value of the revenue-
maximizing and consumption-minimizing taxes are not especially high — increasing the near
zero tax per bidi stick to a tenth of a rupee can halve consumption and increase revenues four-
fold. The following assumptions are used to arrive at these results: (1) no substitution effects due
to price change, (2) change in price is commensurate with change in tax, (3) elasticity is constant
across the entire range of prices, and (4) there is no tax evasion or smuggling as a result of
increased taxes. These assumptions are fairly strong. Allowing for tax evasion, or allowing for
changes in consumption of bidis when cigarette taxes increase might reduce the revenue
projected. Price changes can instead have the opposite effect of further reducing consumption if
bidi and cigarette producers pass on to consumers price increases more than proportionate to tax
increases.
The analysis provides strong support for taxing all tobacco products regardless of form (bidis,
cigarettes or leaf tobacco). However, the existing tax on bidis of Rs 14 per 1000 sticks is
negligible compared to the Rs 819 per 1000 tax on the lowest-taxed filtered cigarette. The recent
study by Jhaetal. suggests that increased taxes on bidis can be justified on health grounds as even
modest levels of smoking substantially increase the risk of death. there is a potential to increase
taxes on cigarettes. An important first step in this context was the move to bring unfiltered
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cigarettes up to the tax treatment of filtered cigarettes in the 2008-09 central government
budgets, as part of the broader move towards a simpler tax administration
Competitor Analysis
With a market share of a whopping 72%, ITC cigarettes do not have to worry much about the
competition at the present moment. Its nearest competitor Godfrey Philips has a market share of
12% which is not really a competition at present.
3.3 SWOT Analysis:
Strength
India is one the largest manufacturers of tobacco in terms of production. Tobacco is traditional
item of India's foreign trade. India is one of the leading Tobacco exporting countries in the
world. India amounts for 5.8% of the international trade and ranks 5 thafter Brazil, U.S.A.
Turkey and Zimbabwe.
Weakness
The growth of various varieties of Tobacco is at the mercy of unscrupulous traders and
middlemen. The burden of Tobacco tax has increasingly shifted to cigarette with the removal of
duty on raw Tobacco since 1979, resulting in discriminatory rates of duty compared to other
Tobacco products. Prohibition of Direct advertising.
Opportunities
Central Tobacco Research Institute at Rajamundry has been entrusted with the r e s e a r c h f o r
d e v e l o p m e n t o f a l t e r n a t i v e u s e s o f T o b a c c o i n v i e w o f a n t i
s m o k i n g campaign. India's share in world cigarette production has remained at around 1.7%
where as India's exports of around 2.8 billion sticks of cigarette per year amounts for less than
1%of the world export of cigarette. There is significant opportunity for cigarette
industry to extent and consolidate its position in intentional market due to some
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recent trend like withdrawal/reduction of agricultural subsidy and escalating cost in the
traditional cigarette exporting countries.
Threats
Various N.G.O’s and Forums against the use and consumption of tobacco. The passing of
various bans on smoking.
3.4Porter’s Five Force Model
1).Threat of new entrance
• New product differentiation very tough –already cigarettes are different price point,
flavours, brand images.
• Access to distribution channel is tough- big & established players are present (e. g. ITC)
• Capital requirement is very large for a pan India launching.
2).Bargaining power of suppliers = low
• Many inputs are required but in small amount – paper, tobacco, filter
• There are many small scale, unorganized suppliers
• Cigarette companies are big and have direct access to distribution channel and addicted
buyers. Suppliers don’t have much control over smokers.
3).Bargaining power of buyers = low
• Addicted customers - even after knowing harms-people can’t leave it
• Smoking has clot of symbolic and emotional value attached with it
• Product quality not much important to smoker’s research show most people can’t
different among the brands in a blint taste.
• Switching cost in terms of price
4).Rivalry amongst existing firms = high
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• Many completing firms: ITC, Godfrey Phillips, VST, GTC etc
• Growth of industry
• Advertisement for cigarettes is now prohibited in India.
• Replacement for – ads event sponsorships and sales promotions.
• All making new product launching
• Product standardisation
• Exit barriers
5).Threat of substitute = low
• Herbal Cigarettes (e.g. Nirdpsh) were launch but did not become a popular.
• Nicotine patch is another substitute – but again no comparison with cigarettes in terms of
popularity and usage.
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Chapter -4
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4.1 Ratio Analysis
4.1.1. Net Profit RatioTable 4.1 Net Profit RatioYear 2007 2008 2009 2010 2011Net Profit Ratio (%)
16.18 10.76 9.86 12.01 14.47
Figure 4.1 Net Profit Ratio
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Net profit margin ratio establishes a relationship between net profit and sales and indicates
management efficiency in manufacturing administering and selling the products. This ratio is
over all measured of the firm’s liability to turn each profit margin may decline due to fall in sales
price or increase in the cost of production.
In 2007 net profit ratio is 16.18%. And that is decline for next two year. Because of ban on
advertisement. That was effect on sales of the tobacco products. Than it was increase.
4.1.2. Current ratio:Table 4.2 Current ratio:Year 2007 2008 2009 2010 2011Current ratio (%)
3.31 3.08 2.78 1.76 2.76
Figure 4.2 Current ratio
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Current assets to current liability that define the current ratio as per the date analysis this ratio is
fluctuate. Highest in 2007 about 3.31 which is good may be due to financial policy &
government & taxes.
4.1.3. Fixed Asset Turn Over Ratio:
Table 4.3 Fixed Asset Turnover Ratio:
Year 2007 2008 2009 2010 2011
Fixed Asset Turn Over
Ratio (%)1.05 3.94 3.11 8.71 5.48
Figure 4.3 Fixed Asset Turn Over Ratio:
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This ratio is concern with how frequently the fixed assets are use to the total sales of the tobacco
product. As the highest ratio the industry is in growing due to efficient use of asses to produce
the product & sales.
4.1.4. Inventory Turnover Ratio
Table 4.4 Inventory Turnover RatioYear 2007 2008 2009 2010 2011
Inventory Turnover ratio (%)
2.1 9.47 7.31 10.27 7.55
Figure 4.4 Inventory Turnover Ratio
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Inventory includes raw material means tobacco, semi finish good & finish package material
which is term as inventory. Now it is compare with total sales of the year. As per data ratio is
good in 2008 @ 9.47 which is reduce in 2009 @ 7.31 and further increasing after year @ 10.46.
That also reduces in 2011 @ 7.55.
4.1.5. Earnings before Interest, Taxes and Depreciation
Table 4.5 Earnings before Interest, Taxes and Depreciation
Year 2007 2008 2009 2010 2011
Earnings before Interest,
Taxes and Depreciation (%)18.82 13.64 6.95 5.95 12.46
Figure 4.5 Earnings before Interest, Taxes and Depreciation
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This ratio is concern with revenue generated without considerate long taxes, interest and
depreciation. Ratio duty says it is steadily decreasing from 2007 to 2010. And then it was
increasing in 2011 @ 12.46.
In period of 2007-2010 it was decreasing due to decline in sales of tobacco product.
4.1.6. Earnings before intrest and taxes
Table 4.6 Earnings before Interest and Depreciation
Year 2007 2008 2009 2010 2011
Earnings before
intrest and taxes (%)17.53 12.49 5.37 5.83 10.5
Figure 4.6 Earnings before Interest and Depreciation
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This ratio is concern with revenue generated without considerate long taxes, interest and
depreciation. Ratio duty says it is steadily decreasing from 2007 to 2009. And then it was
increasing in 2010 @ 5.83 and in 2011 @ 10.5.
In period of 2007-2009 it was decreasing due to decline in sales of tobacco product. That was
effect of bane on advertising of tobacco products.
4.1.7. Return on net worth
Table 4.7 return on net worth
Year 2007 2008 2009 2010 2011
Return on net
worth (%)3.73 4.24 1.02 5.16 11.99
Figure 4.7 return on net worth
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This ratio is most importance for the entire stockholder. This ratio is fluctuating in rates. So
Higher the ratio higher the dividend, internal efficiency term, loyalty of customer Quality
product etc
In 2007-2009 it was fluctuating due to fluctuating in sales. Than it was increase because that
after sales of tobacco product also increase.
4.1.8. Interest Coverage Ratio
Table 4.8 Interest Coverage Ratio
Year 2007 2008 2009 2010 2011
Interest coverage
ratio (%)29.94 23.05 4.14 8.36 29.79
Figure 4.8 Interest Coverage Ratio
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The graph shows that the interest coverage ratio of the Indian tobacco Industry is decreasing
readily from 2007 to 2009. This shows that the inefficiency of the industry to utilize the debt
fund is increasing in every year, and its increase from 4.14% to 8.36% from the 2009 to 2010. In
2011 it was increase to 29.79%. So we can say that efficiency of the industry to utilize the debt
fund is increasing in 2010 & 2011.
Chapter – 5
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5.1 Recommendations
Immediate and sustained measures need to be taken to reduce tobacco use in India. Higher taxes
will reduce tobacco consumption and counter its health consequences, while at the same time
generating significant new revenues, a portion of which can be used to support other efforts as
part of a comprehensive approach to reducing tobacco use. Based on the evidence presented in
this report, we make the following recommendations for tobacco taxation in India:
Increase bidi taxes substantially
India should, over a few years, increase the bidi tax from Rs 14 to Rs 98 per 1,000 bidis. This
will increase government revenue by Rs 36.9 billion (US$ 0.8 billion), raise the tax to 40% of the
retail price, and increase the average price of bidis by 53%. The price increase will avert up to
15.5 million premature deaths that would otherwise be caused by bidi smoking.
Tighten policies regulating bidi production
To effectively address bidi taxation policy, a number of suggestions have been made.
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(i) The small producer exemption should be eliminated or limited to truly small companies
(not those effectively under the direct ownership or control of larger companies).
(ii) The sale of unbranded bidis should be prohibited, and manufacturer names should be
printed on bidi packets to ensure higher tax compliance.
(iii) Reporting of the sale and purchase of processed bidi tobacco by any persons or
entity should be made mandatory. Other safeguards include recording the exact volume
of transactions, and the names of persons involved in all transactions involving the
purchase and sale of bidi tobacco.
Increase cigarette taxes substantially
A significant increase in the existing tax on cigarettes will reduce cigarette smoking and the
resultant public health damage, while at the same time generating higher cigarette tax revenues.
Raising the cigarette tax to Rs 3691 per 1000 sticks (a 460% increase in the tax) will increase the
tax to 78% of the retail price (a 176% price increase). A tax increase of this magnitude will avert
3.4 million premature deaths that would otherwise be caused by cigarette smoking, while at the
same time raise about Rs 146.3 billion (US$ 3.1 billion) in new revenues per year. Bidis and
cigarettes do not appear to be substitute products suggesting that the price increase on one could
be done without fear of substitution to the other. These observations are based on the assumption
that there is no increase in individual tax avoidance or larger-scale organized smuggling in
response to the higher taxes. For India, there is some evidence of a non-trivial and growing
market
for smuggled cigarettes. However, rather than forgoing significant tax increases, we recommend
locally implementation of effective efforts to curb illicit tobacco trade including strengthening
systems of licensing, customer verification, security and preventive measures along supply and
distribution chains.
Simplify, extend and strengthen tobacco taxation
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The practice of taxing cigarettes based on length should be abolished to simplify tax
administration and convey the public health message that all cigarettes regardless of their shape,
design or length are harmful to the health of their users. The overall approach, which would help
maximize public health gains and revenue collection (and decrease tax evasion), would be to
simplify the system by reducing and eventually eliminating the differential taxes on various
smoked tobacco products to eventually end up at a high specific tax that is regularly adjusted for
inflation. In practical terms, effective tobacco taxation includes inflation-adjusted central
government excise taxes on bidis, cigarettes and other tobacco products, and supplementary
excises in the proposed Goods and Services Tax regime, in addition to innovations to tax other
tobacco products more effectively. In a changing tax landscape, detailed and well-planned tax
administration studies that sustain the evidence base for higher taxation of tobacco products will
be especially important. Produced, under-taxed tobacco products — the proper use of evidence-
based tax policy has the potential to have an even greater positive impact on short- and medium-
term revenue, the growth of effective tobacco control programmers, and reduced tobacco use.
Explore earmarking as a means of supporting additional tobacco control efforts
Experience from other parts of the world, including Thailand and Australia, suggests that
earmarking by raising taxes and dedicating some of the new revenues to comprehensive tobacco
control and other social and public health programmers is politically viable. Although increasing
tobacco tax is the single most effective tobacco control intervention, when tobacco taxes are
increased as part of a comprehensive approach to reducing tobacco use, the reductions in use and
improvements in health are greater than from a tax increase alone.
If the tax increases recommended above are adopted and effective tax compliance and ant
smuggling measures are in place, the tax increases would generate more than 18,400 crore rupees
(184 billion rupees, or US$ 3.8 billion) per year. These extra funds could pay for a substantial
proportion of the National Rural Health Mission, National Urban Health Mission and other social
programmers.
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Interventions can have an important impact on the looming crisis of tobacco-related morbidity
and
Mortality in India, while helping to further establish the country’s leadership role in the
development of effective policy-based solutions to the global tobacco epidemic
Chapter 6
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6.1Conclusion
The study has discussed about the Indian tobacco industry with strategic and financial views.
The tobacco industry is one of the most profitable industries in the world. Tobacco companies
use their enormous wealth and influence both locally and globally to market their deadly
products. India is the world’s second largest producer of tobacco. Endowed with rich agro-
climatic attributes such as fertile soils, rainfall and ample sunshine, India produces
various types of tobacco . The immediate and tangible benefits that accrue from tobacco
cultivation, manufacture and marketing act as incentives for farmers to grow tobacco and for the
government to encourage tobacco cultivation and manufacture.
The tobacco industry in India, has sections on each of the tobacco sectors as well as examples of
tobacco promotion, sponsorship and corporate social responsibility efforts designed to increase
consumption and industry profits.
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Chapter 7
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7.1 Bibliography
Websites
www.capitaline.com/
http://www.indiantobacco.com/
http://www.itcportal.com/about-itc/newsroom/press-reports/PressReport.aspx?
id=284&type=C&news=increase-impact-cigarette-volume.
http://www.panparag.com/productsgallery.html .
http://www.godfreyphillips.com/pdfs/Financial-Report-31-03-2010.pdf .
http://www.goldentobacco.in/Profile.htm .
http://www.who.int/entity/tobacco/mpower/mpower_report_full_2008.pdf .
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7.2 Annexure 1 (Balance sheet of Indian tobacco industry)
Year 2011 2010 2009 2008 2007 SOURCES OF FUNDS : Share Capital 71.57 106.29 106.29 39.92 37.7 Reserves Total 27.91 1,061.30 948.73 443.66 396.57 Equity Share Warrants 0 0 0 0 0 Equity Application Money 0 0 0 0 0 Total Shareholders Funds 99.48 1,160.24 1,048.13 483.58 434.27 Secured Loans 0.82 264.92 236.46 206.93 195.58 Unsecured Loans 0 21.1 105.53 452.69 438.5 Total Debt 0.82 286.02 341.99 659.62 634.08 Total Liabilities 100.3 1,446.26 1,390.12 1,143.20 1,068.35 APPLICATION OF FUNDS : Gross Block 32.83 304.23 250.91 208.02 201.03 Less : Accumulated Depreciation 15.74 140.21 128.95 109.15 100.78 Less:Impairment of Assets 0.02 0.03 0.03 0 0 Net Block 17.07 163.53 121.46 98.87 100.25 Lease Adjustment 0 0 0 0 0 Capital Work in Progress 0 19.34 57.76 54.6 6.71 Investments 5.43 686.52 680.31 461.24 254.36
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Current Assets, Loans & Advances Inventories 18.23 230.46 194.05 137.28 126.4 Sundry Debtors 24.91 74.7 65.61 27.05 30.56 Cash and Bank 21.87 171.05 144.91 186.21 294.83 Loans and Advances 50.89 312.8 307.75 355.7 427.31 Total Current Assets 115.9 789.01 712.32 706.24 879.1 Less : Current Liabilities and Provisions Current Liabilities 14.74 166.29 158.87 154.54 152.95 Provisions 22.26 39.74 17.41 25.17 21.25 Total Current Liabilities 37 206.03 176.28 179.71 174.2 Net Current Assets 78.9 582.98 536.04 526.53 704.9 Miscellaneous Expenses not written off
0.03 1.67 1.68 1.57 1.78
Deferred Tax Assets 0.14 2.19 2.08 2.31 2.04 Deferred Tax Liability 1.27 3.08 2.79 1.92 1.69 Net Deferred Tax -1.13 -0.89 -0.71 0.39 0.35 Total Assets 100.3 1,453.61 1,397.01 1,143.20 1,068.35
7.3 Annexure 2 (P & L of Indian tobacco industry)
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Year 2011 2010 2009 2008 2007 INCOME : Sales Turnover 184.36 1,278.97 1,016.77 854.77 879.62 Excise Duty 43.77 255.24 264.91 269.15 323.62 Net Sales 140.59 1,023.73 751.86 585.62 556 Other Income 5.17 35.1 28.65 53.66 177.8 Stock Adjustments -2.99 -1 10.17 5.99 4.37 Total Income 142.77 1,057.83 790.68 645.27 738.17 EXPENDITURE : Raw Materials 42.58 461.72 367.02 305.59 372.82 Power & Fuel Cost 1.89 12.54 9.95 9.23 10.43 Employee Cost 4.09 63.75 49.81 44.72 36.52 Other Manufacturing Expenses 48.45 130.56 92.85 63.06 71.9 Selling and Administration Expenses 12.11 152.62 118.96 106.38 93.01 Miscellaneous Expenses 1.4 32.46 21.5 16.03 11 Less: Pre-operative Expenses Capitalised
0 0 0 0 0
Total Expenditure 110.52 853.65 660.09 545.01 595.68 Operating Profit 32.25 204.18 130.59 100.26 142.49 Interest 0.26 35.75 41.11 24.42 17.74 Gross Profit 31.99 168.43 89.48 75.84 124.75 Depreciation 1.1 14.23 10.6 10.9 11.79 Profit Before Tax 30.89 154.2 78.88 64.94 112.96 Tax 10.41 22.24 5.64 2.55 11.25 Fringe Benefit tax 0 -0.01 3.16 2.8 1.34 Deferred Tax 0.01 0.17 -0.1 -0.03 8.17 Reported Net Profit 20.47 131.8 70.18 59.62 92.2 Extraordinary Items 0.54 8.77 -3.97 -3.85 2.04 Adjusted Net Profit 19.93 123.03 74.15 63.47 90.16 Adjst. below Net Profit 0 0 0 0 0 P & L Balance brought forward 8.41 420.7 367.29 323.6 250.59 Statutory Appropriations 0 0 0 0 0 Appropriations 6.66 37.84 16.77 15.93 19.19 P & L Balance carried down 22.22 514.66 420.7 367.29 323.6 Dividend 0 17.21 8.61 8.61 8.72 Preference Dividend 3.98 3.98 0 0 0
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