ITC ready to enter e-cigarette biz: Y C Deveshwar

ITC is ready to enter the e-cigarettes business, but intellectual property rights (IPR) issues are coming in the way, said ITC chairman Y C Deveshwar.

“We are in all readiness as far as e-cigarettes are concerned but there are some IPR issues. There is a new government now and we would like to engage with the authorities on the matter,” he said while replying to a question during a press conference.

E-cigarettes market is at a nascent stage in India and it deals with warming the cigarettes rather than burning it. It is said to be less harmful than consuming cigarette sticks. Across the globe, especially in USA, the sector has started growing slowly.

In India, there are a few companies that are in the business of e-cigarettes but those are relatively very small players. The announcement comes at a time when cigarettes stick volumes have been on a decline for ITC in the last three quarters continuously. Cigarettes business drive 83% of ITC's pre-tax profits but the business is facing challenges owing to higher excise tax being imposed by the government. "It's challenging," Deveshwar said, when asked how the volume decline would affect profitability in the coming quarters. During the first quarter of FY15, ITC has witnessed a volume decline of about 3 per cent in the cigarettes business.

The Kolkata-based conglomerate was in constant dialouge with state and central governments for an equitable approach on taxing cigarettes. In the last budget, the government imposed a steep hike of 11-72% excise hike on cigarettes.

ITC has sticks below 65 mm size which are taxed the highest at 72%. On whether the segment would remain viable after imposing such high taxes, the ITC chairman said, "It would be viable but would not be able to compete with illegal cigarettes."

Earlier in the day, he had said in his speech: "I am of the view that it is a tactical approach that cigarettes are being taxed heavily. Let me tell you only 12% tobacco consumption is in legitimate cigarette consumption. On the rest there is very little tax increase in other areas."

ITC Limited