Hyderabad: The increasing smuggling of cigarettes into the country is not only robbing the government of taxes, but is also funding hawala rackets and leading to suicides by tobacco farmers.
An ITC report says: “The unprecedented fall in the sales volumes of legal cigarette and the reduction in the utilisation of Indian flue cured Virginia tobacco is having a devastating impact on tobacco farmers in the country. The sharp decline in domestic demand has led to a significant drop in tobacco prices in the ongoing auctions in AP causing deep distress to thousands of tobacco farmers.”
Sources in the Customs department said that Indian cigarette makers including ITC have complained to law enforcement agencies that their revenues are dropping due to the grey market. It is estimated that the share of the illegal cigarette industry is around 20 to 25 per cent of the total market in the two Telugu states.
According to the ITC report on the financial results for the quarter ending December 31, 2015 the share of legal cigarettes in the country declined from 21 per cent in 1981-82 to 11 per cent in 2014-15 despite tobacco consumption increasing in India.
At least 22 tobacco farmers committed suicide in 2015 in Andhra Pradesh and Karnataka due to te fall in production and low prices.
Despite the recent DRI probe leading to the arrest of Begum Bazaar kingpin Mohammed Hasnuddin, the wholesale cigarette dealer of SS Traders, and several cases of confiscation of cigarettes at airports and seaports by Customs and Commercial Taxes departments, the smuggling continues.
DC had earlier reported how Indonesian cigarettes without pictorial warnings were smuggled and sold in Hyderabad.
In October 2015 DRI officials had arrested six persons involved in the smuggling of foreign cigarettes valued at Rs 1.4 crore via the Air Cargo Complex at RGI Airport. Investigations had led to the arrest of Hasnuddin from Begum Bazaar. He was later released on bail.
Law enforcement agencies suspect that there are several other racketeers operating from Begum Bazaar.
Meanwhile, the Commercial Taxes departments of AP and TS continue to show increased tax revenues on cigarettes due to increased consumption. AP has shown 30.86 per cent growth this year (Rs 616 crore) though Telangana took the brunt of illegal smuggling with only 3.36 per cent growth.
Vijayawada-2 division Commercial Taxes deputy commissioner S. Sekhar said, “Cheap, spurious cigarettes, imitating international brands, are coming from Bangladesh via Kolkata on rail. We have confiscated such goods.”
ITC said in its report that over the last three and a half years, excise duty and VAT on cigarettes have gone up by 98 per cent and 124 per cent respectively, which is exerting severe pressure on the legal industry volumes even as illegal trade was growing unabated and without any checks.
Smugglers exploit Rs 20 lakh rule
Foreign cigarette smugglers who are frequent flyers to Gulf countries escape arrest from Customs officials as they bring in less than '20 lakh worth of cigarettes each time.
As per rules no arrests can be made for undeclared or under-declared baggage worth below RS 20 lakh. Hyderabad Customs booked 199 cases this year against cigarette smugglers from Abu Dhabi, Bahrain, Doha, Dubai, Sharjah and Muscat but not even one person was arrested.
The number of cigarettes confiscated in 2015-16 was 18.5 lakh, worth around Rs 95 lakh. “After gold, cigarette smuggling is the big thing,” said an official.
In AP too, the districts of Krishna, East and West Godavari are witnessing illegal sales of foreign cigarette brands.
