Reduced supplies drive up cigarette prices

A ROUTINE WHICH PLAYS OUT BEFORE EVERY BUDGET SESSION
AMEET OBEROI
GANGTOK, 24 Feb: Cigarette smokers in Sikkim have, for more than a fortnight now, been made to pay more than what their respective poisons are priced at. Shortage of cigarettes in the run-up to the Union Budget is a routine affair [since this is one product which is confirmed to attract an enhanced tax], and it is invariably the peripheries [accept it, Sikkim is one] where the supplies are cut back as the manufacturers wait for the new rates and opportunist hoarders start stocking up to earn usurious profits by selling stock picked up in old rates for the hike prices.
Needless to add, this leads to a lot of speculation and extensive allegations.

At present, at least in Gangtok, a packet of Wills Flake [the most smoked brand], which comes with a printed price of Rs. 25 per packet, is being sold across the board for not less that Rs. 30. And that is when a smoker picks up, or gets, an entire pack of 10. Most retailers [the neighbourhood paan shop in most cases] are not selling entire packets and palming off the sticks one at a time for Rs. 4 per piece. That’s a neat total of Rs. 40 on each pack.
Wills Navycut, a pack of 10 priced at Rs. 40, is sold for Rs. 6 apiece now. It is very rare to find a shop which will offer a packet for sale.
The same story repeats with all brands.
Even though smokers are being made to pay more, they are not being allowed the option of receiving the brand they are addicted to.
The streets offer only speculations to explain the scenario, and while we will get to those as well, we begin with where the cancer sticks start their supply chain from in the capital – the Beu Organisation, wholesale dealers for Indian Tobacco Company [ITC] for East and North Sikkim situated at MG Marg.
While speaking to NOW!, an employee at this establishment informs that there was short supply from ITC itself. This, he explains, happens almost every year around this time [in the run-up to the Union Budget].
“Since the price of cigarettes will definitely go up with the budget, the company scales down production because it is more expensive for the company to make the cigarette packets than producing the cigarette itself. When prices go up, the new MRP will have to be printed and dispatched from the company’s factories and its stock with old price listing will have to be replaced,” he explains.
This makes only partial sense and one will have to wait till after the prices have gone up to check whether packets with the old prices are still being circulated and sold at the new prices. This would invariably suggest hoarding for later profiteering.
Needless to add, with production levels having being scaled down, supplies are also reduced.
It is also learnt that supply quotas, especially at times like this, are fixed by the company [ITC] at its own discretion and not pegged to what the wholesalers requisition.
“We usually get and sell about 200 to 250 cartons per month [all types of cigarettes included], but this month supply has been so low that we have just received only between 60 to 80 cartons, of which around 20 cartons are yet to reach us,” an employee at Beu Organisation informs to counter suggestions that they were hoarding up.
On the suggestion that they were charging more, he contended that as dealers appointed by ITC, they could not charge higher than prescribed rates.
The neighbourhood paan-shops, meanwhile, while agreeing that there is a “crisis” of supplies, insist that it should be the dealers’ responsibility to maintain supplies. On conditions of anonymity, they also insist that the wholesalers were charging them higher than the prescribed rate, reducing the retailers margin and thus leaving them with no option but to charge more themselves.
Some even claim that since supplies from the dealer here were not adequate, some of they were picking up stocks from Siliguri. This, at a higher cost, and with the transportation costs added, were charging more from the consumers here.
All these explanations work only at a very superficial level, and at best explain only the shortage; the illegal price hike remains unexplained. What is obvious though is that the retailers here are preying on the same addiction which the Union Budget exploits every year with increased taxation.