Retailers create cigar shortage; expect price hike in Budget

07 Nov 2021

Retailers create cigar shortage; expect price hike in Budget

07 Nov 2021

By Imesh Ranasinghe Retailers are stocking cigarettes around the country, creating an artificial shortage amidst talks of a cigarette price formula and possible moves by the Government to increase prices through the upcoming Budget. Speaking to us, a spokesman from the Excise Department said that the cigarette shortage in the country has been prevailing for the last two weeks. According to sources, it is not an issue with cigarette manufacturers, but retailers who are creating an artificial shortage by stocking up in the expectations of a price increase in the upcoming Budget. “There is a threshold on the number of cigarettes that can be produced for a month by the manufacturers; they have already issued that amount to the market, and the market is keeping it without selling,” sources from the Excise Department said. It was reported that some retailers have completely stopped selling cigarettes, while some are making the most of the opportunity by selling at higher prices. “We are stocking up, because if there is an increase, we don’t want to incur a loss by selling the stocks at low prices,” one shop owner said. Moreover, last Thursday (4), National Authority on Tobacco and Alcohol (NATA) Chairman Dr. Samadhi Rajapaksa said that the NATA has presented a cigarette price formula to be implemented through the upcoming Budget to increase prices every year to discourage users. He said that the formula was created on a scientific basis and it will lay out the process very clearly to ensure transparency. This formula will supposedly increase the income to the Government by Rs. 125 billion. In Sri Lanka, the price of cigarettes could increase in two ways; the company can decide the price based on the cost of production or the Government can tax by increasing the tobacco tax or by taxing per cigarette manufacturer. Tobacco tax in Sri Lanka is governed by the Tobacco Tax Act. It was revised on two occasions in 2016, where the prices of cigarettes were increased by 143%. A cigarette in Sri Lanka today costs between Rs. 65-80 with a 20-pack costing Rs. 1,300 to Rs. 1,600. Median household income per month sits around just Rs. 62,000 per month, with a Central Bank report pointing to just 2% spending on tobacco and alcohol. Effectively, a consumer spending on a full pack of cigarettes amounts to 2% of the monthly median income. The Ceylon Tobacco Company reported profits of Rs. 3.9 billion in the second quarter of 2021, while the revenue for the quarter with government taxes was at Rs. 30 billion. In 2020, 2.3 billion sticks were sold, which is a reduction due to the lockdowns and price hike that happened in 2019. The Government had a drop of Rs. 10 billion in revenue when compared to 2019.

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Retailers create cigar shortage; expect price hike in Budget

Retailers create cigar shortage; expect price hike in Budget

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