ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Trapped in Excise Net

Trapped in Excise Net Hansavivek GTC INDUSTRIES sold 16,702 million cigarettes in the year ended June 1986 as against 21,041 million cigarettes in the previous year, a decline of 21 per cent over the year. Sales realisation, however, increased from Rs 92.53 crore to Rs 125.56 crore and other income decreased from Rs 25.88 crore to Rs 18.68 crore. Gross profit was only a shade higher at Rs 4.80 crore (Rs 4.75 crore). These figures reflect deterioration of margins. With taxation claiming more, net profit turned out to be lower at Rs 1.83 crore (Rs 1.97 crore). Dividend has been raised by a point to 23 per cent and is covered 1,60 times as against 1.80 times previously. The decline in sales volume has been attributed to the drastic change in excise duty structure introduced by the government in September 1985. As against the earlier structure where the industry had the flexibility of placing its products in the market at price intervals of Rs 5 per 1,000 cigarettes, the new structure introduced five price segments. Thus, for one of the slabs, viz, price between Rs 61 and Rs 170, the duty is Rs 125. Similarly, The Week's Companies for price between Rs 171 and Rs 300 the amount is Rs 225. To illustrate, the company's Panama Virginia brand with an earlier marked retail price of Rs 90, which had an excise component of Rs 67, had to be priced at Rs 170 with an excise duty component of Rs 125 which comes to an increase in excise duty of 86 per cent. This, according to the directors, has resulted in massive market disturbances resulting in severe setback to the industry.

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