As duties make cigarettes expensive, foreign brands like Luvin Fresh surreptitiously enter the market
Gudang Garam, Djarum Black, Luvin Fresh or A Mild might induce a haze of unfamiliarity in the minds of most people in India, but these are some of the hottest names that have prompted enforcement agencies to smoke out those who are bringing such foreign cigarette brands into the country on the sly.
The smuggling racket rung alarm bells recently when revenue intelligence officers decided to dig deeper into containers with waste paper and plastic that had arrived from Dubai, only to discover 32.1 million cigarette sticks worth Rs 23.29 crore — the largest ever haul of foreign-made cigarette brands in the country.
After this haul at Hazira port in Surat, the enforcement agencies sounded an alert, leading to the revelation that the firms making these imports were non-existent at the given addresses.
Since such cargo had been cleared several times in the past, the Directorate of Revenue Intelligence (DRI) launched an in-depth investigation. It’s not just that consumers in India are dying to take a puff of Gudang Garam, Djarum Black and A Mild Indonesian clove cigarettes, or Luvin Fresh, another Indonesian brand. High taxes on cigarettes and tobacco products in India have made smuggling very lucrative.
Foreign cigarette brands are, therefore, making their way into not just metros but also smaller cities across the country, officials said. Import duties as high as 90% and excise duty, which was raised by 25% in the Budget for 2015-16, led to a spike in domestic prices, making smuggling of cigarettes even more attractive.
With a large number of smokers unable to kick the butt despite increase in prices with each successive Budget, consumers have taken to smuggled brands that are sometimes cheaper.
Cigarettes can be imported under open general licence, a permit that does not impose any export obligation on the importer after payment of the relevant duty. One container with 70% cigarettes hidden along with 30% other cargo could fetch as much as Rs 3-5 crore, an official explained, adding that with only shipment cost as the incremental expenditure, such foreign brands are gaining huge popularity in the country.
In 2012-13, a total of 41.3 million sticks valued at Rs 37 crore were seized, in 2013-14 over 12.3 million sticks (valued at Rs 11 crore) and in 2014-15 more than 89 million sticks (valued at Rs 71 crore), were impounded by DRI, which has done over 90% of the seizures in the country. “The numbers have gone up but it is difficult to fathom the magnitude,” said a customs official.
The usual modus operandi of any illegitimate cargo is to hide it behind legitimate cargo, which is usually declared to customs in documents. In the case of cigarettes, declared cargo is usually furniture, plastic or paper, officials said. Merely 1% of containers are subjected to close checks and selection of these containers is carried out on a random basis, making the task of the agencies tougher.
“Without specific intelligence, it is difficult to seize such containers,” the official said. Moreover, scanning of containers, which can prevent concealment of illegitimate goods, is restricted to major ports, he added. THEECONOMIST