ITC shuts cigarette plants as SC favours new pictorial warning rules
06 May 2016
ITC Ltd, the largest buyer, processor and exporter of leaf tobaccos in India, has shut its plants since 4 May, following a Supreme Court ruling that cigarette companies should comply with a government order that stipulated pictorial warnings covering 85 per cent of cigarette packs (See: SC says 85% warning on tobacco packages a must). ITC stopped cigarette production as the company weighed the future course of action whether to comply with the Supreme Court's order of prominently displaying pictorial warning against tobacco consumption or wait for the Karnataka High Court to decide on the fate of cigarette business.
"The Company has had to shut its cigarette factories from May 04, 2016 until the Company is in a position to comply with the interim requirements pending hearing in the Karnataka High Court," ITC stated in a filing with stock exchanges.
The apex court, while favouring the government order, transferred all petitions by cigarette manufacturers pending in various courts to the Karnataka High Court for further hearing.
ITC officials said the company will consider the current cigarette stock in the market before restarting production, adding that the current inventory level is sufficient to meet the demand for a few weeks.
While all cigarette companies are opposed to the new warning requirements, other manufacturers like Godfrey Phillips and VST Industries are yet to respond to the Supreme Court ruling.
For the $11-billion cigarette already hit by declining demand, the new warning requirements come as another hurdle.
ITC is the largest buyer, processor and exporter of leaf tobaccos in India and the single largest integrated source of quality tobaccos. The company exports tobacco and tobacco products to 50 countries across more than 70 destinations.
ITC pioneered the cultivation and development of leaf tobaccos in India nearly a century ago, helping the Indian farmer grow quality leaf tobaccos and linking him to global markets.