Tobacco shares surge as ban on selling loose cigs shelved

Shares of ITC Ltd soared 6 per cent intra-day today as it emerged that the government is unlikely to ban sale of loose cigarettes in short term. Other cigarette-related stocks like Godfrey Phillips India and VST Industries were up 10 and 6 per cent respectively.

The health ministry proposal to ban the sale of loose cigarettes is likely to be put on hold following objections by some MPs, including union ministers, and farmers' associations against the drastic regulation.

At a meeting called by union minister Venkaiah Naidu, health minister J P Nadda assured the MPs that he will look into all issues pertaining to tobacco and areca nut growers and industry before taking any policy decision.

Union ministers besides MPs from two major tobacco-producing states Andhra Pradesh and Karnataka, including Ananth Kumar and Nirmala Sitharaman and Mohanbhai Kundaria, were present at the meeting where Nadda was told to address all concerns and not to take any hasty step.

Naidu, who also discussed the issue with agriculture minister Radhamohan Singh, said tobacco and arecanut are two important cash crops in the country and in many parts, the livelihood of farmers depend on them. The parliamentarians were of the view that without providing suitable alternatives to cash crops in tobacco and arecanut-growing areas, farmers should not be penalised by introducing drastic regulatory measures.

Government sources said an inter-ministerial consensus over the issue is also unlikely to evolve soon. Naidu, who hails from Andhra Pradesh, said the proposed regulatory amendments will only result in shift in consumption from cigarettes to other cheaper tobacco products like bidis and chewing tobaccos without curbing overall tobacco consumption.

He convened the meeting after getting representations from tobacco-growing farmers' associations in the two states on the likely adverse impact on their livelihood due to the proposed amendment to the Cigarettes and other Tobacco Products Act.

Naidu told reporters later that Nadda was told not to take any "hasty" step till inter-ministerial consultations are over and until alternative crops are decided. A proposal to bring restrictions should not be brought now till the issues are resolved.

India is the second largest tobacco producer in the world and its export earns foreign exchange of over Rs6,000 crore annually. As regards arecanut along with betel, it was emphasised that they were an integral part of Indian tradition and being used widely since ancient times in religious activities, weddings and other functions.

Naidu said Nadda assured the meeting that he will look into all issues pertaining to tobacco and arecanut growers and industry before taking any policy decision.

Nadda had told Rajya Sabha last week that his ministry has accepted recommendations of an expert panel, which was constituted to give suggestions for reducing tobacco consumption, that sale of loose cigarettes be banned and circulated a Cabinet note for inter-ministerial consultations (See: Govt plans ban on sale of loose cigarettes to curb consumption).