ITC to hike cigarette prices by up to 13%, retailers say

New Delhi: ITC Ltd, India's largest cigarette maker, is set to increase prices of its leading cigarette brands, India Kings, Classic and Gold Flake, by 11-13%. Packs with the new price tags will hit retail stores this week, according to retailers.

The increase in cigarette prices was expected as the Union budget on 1 February had proposed hiking the excise duty on cigarettes between 2.5% and 6%. ITC is passing on the increased duty to the consumers.

A pack of 10 king-size sticks (length: 84 mm) of India Kings will now cost Rs150, up 11% from Rs135 earlier while similar packs of Classic and Gold Flake Kings, ITC's two top selling brands, will cost Rs139, up 13% from Rs123 earlier.

ITC has also decided to hike prices of Insignia cigarettes by 10%. A pack of 10 sticks of Insignia will now cost Rs165, up from Rs150 earlier.

"Prices of few select brands have been revised," said an ITC spokesperson.

Post-budget, equity analysts have estimated a 5% rise in ITC's cigarette volumes. The estimate was revised from 3% (pre-budget) as the excise hike at 6%-lowest in the past six years-was below the expected



8-10%. "Cigarette volumes in FY18 are likely to see second year of growth after being down by 15% between FY10-16," said Abneesh Roy, an analyst with Edelweiss Securities Ltd.

ITC had, before the budget, increased prices by around 14% for cigarettes of 69mm and 74mm lengths, including top-selling brands Navy Cut and Gold Flake (regular). No more price hikes are expected for cigarettes of 69-74mm lengths soon.

Roy of Edelweiss also said that ITC can "easily" increase the price of 69-74mm cigarettes by another 4% to counter the 6% excise hike proposed in the budget this year.

Last year, ITC had increased cigarette prices by 12.8% after the budget proposed to increase excise duty by 10-15%.

Increasing cigarette prices is an annual exercise as the government hikes excise duty on tobacco products every year in its budget proposals. Excise duty on cigarettes has jumped substantially since finance minister Arun Jaitley proposed the first budget of the National Democratic Alliance in July 2014. In 2015, excise on cigarettes was increased up to 25% depending on length and in 2016 it was increased by around 10%.