CHENNAI: Smuggling of misbranded cigarettes from south-east Asian countries into India causes an annual tax revenue loss of Rs 21,000 crore, apart from helping finance terrorism, India’s biggest cigarette manufacturer has cautioned in a letter to the Union finance ministry, sources said.
The letter written by ITC Ltd, forwarded to all Customs and Directorate of Revenue Intelligence (DRI) formations last month, flags widespread smuggling of counterfeit cigarettes via air, sea and land routes, as well as speed post from foreign countries, mainly south-east Asia and Middle East, to India. Apart from tax losses and funding organised crime rackets, this affects tobacco farmers as cigarettes are manufactured abroad, the letter stated.
DRI data shows seized 9.1 crore cigarette sticks worth Rs 179 crore were seized in anti-smuggling operations in 2023-24, over 50% of which was via sea route. This is a 33% rise from last year and nearly double of what was seized in 2019-20. DRI and Customs together seized 17.85 crore sticks in FY24 worth Rs 308 crore.
One of the biggest seizures in FY24 of 63.7 lakh cigarette sticks was in Chennai port. Customs officials, both at seaports and airports in Chennai and Trichy, routinely foil cigarette smuggling bids. About 20 lakh cigarettes worth Rs 3.5 crore concealed in bitumen drums were seized at Chennai Port last month.
Such counterfeit cigarettes are available across India, officials said. DRI identifies India as a key destination and transit hub for illicit tobacco products, which poses challenges to public health, economy and law enforcement. This is a profitable venture for criminal networks, DRI said.
There are two main reasons for this illegal trade. Indian probe agencies say cigarettes are subject to high taxes and import duties intended to curb consumption. The cost difference in legal cigarettes and smuggled ones is what drives this trade. Officials estimate the margin on sale of each smuggled stick at Rs 10 and that shopkeepers can sell it at cheaper than Rs 18-20 that Indian made cigarettes cost.
Profits are huge even after adding shipping costs as labour costs in south-east Asian countries like Cambodia and Vietnam is lower, officials say.
Secondly, though branding on smuggled cigarettes is similar to originals, they don’t comply with packaging and labelling regulations, officials say. Postulating that the seizures made by agencies might only be the tip of the iceberg, ITC in the letter has urged the enforcement agencies to tighten vigil and seek cooperation from governments of other countries to crackdown on illicit manufacturing and distribution network of such misbranded Indian cigarettes.