Smuggling, counterfeits resulted in Rs39,239 crore loss to govt in 2014

The Ficci report says the illicit market has grown 49.84% from 2012


Bengaluru: Smuggling and counterfeiting of goods in India has cost an estimated loss of Rs39,239 crore to government in 2014, says a report by Federation of Indian Chambers of Commerce and Industry (Ficci), a lobby group.

The illicit market has grown 49.84% from 2012, the first time Ficci commissioned such a study, the trade body said. It covered nine industries that included alcoholic beverages, tobacco, auto components, computer hardware, packaged consumer foods, personal consumer goods, mobile phones, motion pictures and broadcasting.

The maximum revenue loss, 23% of the overall loss estimated to the exchequer was in tobacco, followed by mobile phones at 17% and alcohol beverages at 16%, the study said.

Due to high tax rates and complex structures in levy collection across states, a major share of the tobacco market has been taken up by fake products, said P.C. Jha, adviser to Ficci Committee Against Smuggling and Counterfeiting Activities Destroying the Economy (CASCADE), which commissioned the report. In some states, the supply of legal cigarettes shows a decline while illegal firms have taken over the market, said Jha, who was former chairman of the Central Board of Excise and Customs (CBEC).

The study was conducted by Thought Arbitrage Research Institute (TARI), a non-profit think-tank, for Ficci. The figures are only a projection and for information purposes but not authoritative or complete, TARI said in the report.

“We checked whether the quality of goods manufactured and imported, the two legal sources of getting it in the market, tallies with the quantity of the same product consumed,” Jha said. “Except for the media and entertainment sector, the data was taken from household consumption and production figures released by the government’s NSSO (National Sample Survey Organisation) and Annual Survey of Industries (ANI), respectively.”

The study looked into only losses on account of tax revenues—both direct and indirect taxes. If incremental costs incurred by government on account of welfare measures, enforcement and legislation and interest costs are also estimated, the losses for government would be significantly higher, the report said.

The report shows the vast spread of the problem, said Deep Chand, Ficci CASCADE adviser and New Delhi’s former special commissioner of police. “Illicit market affects farmers in Punjab, who are commuting suicide because their pesticides do not work, to 20% of road accident victims, who die due to fake auto parts,” said Chand.

During the release of the report in Bengaluru on Thursday, Chandra Sekhar, joint commissioner (crime) with Karnataka police, said it’s high time the country has an institutionalized mechanism for sharing information to monitor the illicit market across states.