FICCI report bares extent of damage to economy through illegal marketing
By Our Staff Reporter
Guwahati, July 28: Smuggling, counterfeiting and all sorts of illegal marketing continue to cause huge losses to the country’s exchequer. The losses in just seven sectors of manufacturing industry totaled up to a staggering Rs 39,239 crores last year. This is considerably higher than losses in the year 2012, pegged at Rs 26,190 crores. Assam figured prominently in this alarming picture, with illegal cigarettes and liquor distributed from the State harming the country’s markets in these sectors.
The seven sectors under the scanner include FMCG packaged foods and persol goods, computer hardware, automobiles, mobile phones, tobacco & alcohol and the media and entertainment Industry including the broadcasting and motion pictures sectors. Among these, tobacco products caused the maximum revenue loss to the exchequer, a whopping figure of Rs 9,139 crore, followed by mobile phones and alcoholic beverages.
This has been revealed in a report titled ‘Illicit marketing: A threat to our tiol interest’ brought out by Federation of Indian Chambers of Commerce and Industry (FICCI) Committee Against Smuggling and Counterfeiting Activities Destroying the Economy (CASCADE), released at a press conference in the city today.
The state of Assam has seen a significant growth in illicit trade among these sectors in the last couple of years. It is one of the fastest growing markets for illegal cigarettes and alcohol in the country. Illegal cigarette industry is estimated at more than 25% of the total cigarette market in the State. Interestingly, the supply of legal cigarettes is showing a decline, while illegal players have taken over this market and are growing at a higher rate.
In case of alcohol too, the illegal market in Assam has grown significantly in value and much higher in quantity, especially for IMFL and imported liquor.
Additiol Director General of Police-Crime Branch, CID of Assam Mukesh Sahai said: “High State level taxes like VAT and imposition of health cess on legal cigarette industry, are the key reasons for such an alarming growth of illegal cigarette industry in the State. Most of the manufacturers of such illegal cigarettes evade the high Central excise duty and State taxes or cess and thus are able to offer their products to consumers at rock-bottom prices. Thje price of an illegal cigarette pack in Assam is one-fifth of the price of a legal packet, which makes it very attractive to consumers, particularly the youth and rural consumers.
“Smuggled intertiol contraband cigarettes are another big mece contributing significantly to the alarming growth of illegal cigarette industry in the State. Assam shares a porous intertiol border with Bangladesh. Meanwhile, other states in the Northeast also share borders with Myanmar, Bangladesh, Chi etc. Therefore, there is a sizeable influx of cheap king-sized smuggled cigarettes from countries like Bangladesh, Chi and Myanmar into Assam,” pointed out Sahai. This has also resulted in a loss of State revenue from the cigarette industry by over 50 per cent (amounting to hundreds of crores of rupees) ever since the VAT rate on cigarettes was increased.
Sahai further revealed that the Northeast has become a distribution centre for the rest of the country for such cheap smuggled cigarettes origiting in the neigbouring countries. All these smuggled cigarettes are transported from Assam and other NE states to the rest of the country by air, bus and train. Such illegal cigarettes totally defeat the tobacco control objectives of the Government as they neither bear any health warnings required under Indian laws, nor have other mandatory declarations like MRP, date of manufacture or place of manufacture.
FICCI CASCADE advisor PC Jha said: During the last twenty years, the volume of the counterfeiting activity has increased 100 times and the size of trade in counterfeited goods is 10 per cent of the legal intertiol trade. The loss to manufacturing related sectors has increased by 44.4per cent in the two years, from Rs 72,969 crore in 2011-12 to Rs 105,381 in 2013-14. A significant reason for this being that high tariffs and taxes create opportunities for those involved in illicit markets to step in and supply ‘reduced’ versions of the origil product at lower prices.”
FICCI advisor Deep Chand pointed out that in the past few decades, leading intelligence and law-enforcement agencies around the world have found conclusive evidence of the increasing involvement of terrorist organizations in counterfeiting, piracy and smuggling activities to fund their activities. “The need of the hour is tangible actions to increase enforcement and to impose increased punishments. This is imperative to reassure legitimate business owners and consumers that the government is serious about protecting right owners which, in turn, would elicit greater support for government policies,” he said.