BackITC shuts cigarette factories to meet pictorial warning norm
ITC shut its units on 4 May and plans to keep them shut till it can comply with the interim requirements
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Kolkata: ITC Ltd said in a regulatory filing on Thursday that it has shut its cigarette factories, again, to comply with new norms on pictorial health warnings on packs.
The announcement comes in the wake of the Supreme Court refusing to stay a government order mandating introduction of bigger pictorial warnings covering at least 85% of the surface area of packs, up from 40%.
The new norms were to come into force on 1 April, but were challenged by Indian cigarette makers in various courts. The Supreme Court ordered the transfer of all those cases to the Karnataka high court.
ITC said in a notice to stock exchanges that it shut its factories on 4 May, and that production will remain suspended “until the company is in a position to comply with the interim requirements". There is no clarity immediately on how long ITC’s factories will remain shut, and how it may impact supplies in the market. Normally, it injects enough inventory into the market to avoid supply disruptions.
A spokesperson for ITC refused to elaborate on the regulatory filing. ITC and other cigarette makers have been resisting the introduction of bigger pictorial warnings because in their view it would lead to further contraction in sales.
They say packs with bigger pictorial warnings would become unattractive compared to contrabands, which have smaller or no pictorial warnings at all. Sales of such tax evaded cigarettes, they claim, are growing rapidly and currently cost the national exchequer at least ₹ 9,000 crore in lost taxes.
Indian cigarette makers also say that a survey had proven that the pictorial warning on packs, introduced in India in 2009, adequately communicated the ill effects of smoking. So making it bigger wasn’t required to improve awareness.
On 1 April, ITC and other leading cigarette makers had halted production because of lack of clarity on the new norms. Two weeks later, the company said stock markets’ filing that it was to resume production soon on the strength of a high court order. It didn’t, however, give details of the order it was referring to. To be sure, packs with bigger pictorial warnings have not arrived in the market yet.
The suspension of production last time didn’t impact supplies in a big way, though in some markets, there were reports that smokers had to pay more.
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