Cigarette cos to see muted volume growth in FY10: IDFC SSKI
June 26th, 2009
The Maharashtra government has increased the value added tax (VAT) on cigarettes to 20% from 12.5%. The Delhi government too hiked VAT on cigarettes by 7.5% and other states may soon follow suit.
Nikhil Vora of IDFC SSKI said Mumbai and Delhi constitute more than 20% of cigarette manufacturers’ revenues. “Most ITC brand prices have been hiked by 4% to 5% and further substantial price hikes would lead to volume de-growth.” Vora added he expected muted volume growth of 3% for cigarette manufacturers in FY10.
Commenting on the issue Sanjay Dalmia of GTC said that he expected other state governments too to hike VAT rates. He added that any increase in prices should be shared by the industry and government.