According to the experts, it has been revealed that despite the finance ministry in India having decided to increase the excise duty on tobacco cigarettes, the big tobacco manufacturing companies would not really be hurt by the act. Without a shadow of a doubt, the fact remains that the total number of smokers in India are quite large in number and new smoking enthusiasts are being added to that number on a daily basis. Owing to this very reason, the big tobacco manufacturing companies do not have much to lose and this is why they are able to manage quite well, despite the proposed hike in the excide duties by the Indian government.

According to the Indian Finance minister, Pranab Mukherjee, the hike in cigarette process is to be applicable in the 2012 to 2013 financial year. As per the hike, all cigarettes which exceed the 65mm length would have to pay an extra 10% excise duty. This in turn would increase the price of the cigarettes marginally. Nonetheless despite the price hike, the price of shares managed by ITC surged to an all time high of Rs. 225, on the National Stock Exchange. ITC happens to be a leading tobacco cigarette manufacturing company in India. Some other big tobacco companies such as Godfrey Phillips as well as VST Industries experienced a surge in their share prices. This clearly states that the demand for cigarettes in India is on the rise and top tobacco manufacturers are actually doing great business.

The fact remains that the hike in excise rates was on fewer variants of cigarettes, owing to which, the share prices continued to surge, ensuring great profit margins for the big tobacco players in India. Nonetheless, experts are of the opinion that when higher excise duties are levied on chewing tobacco, then people would start to seek healthier alternatives such as an electronic cigarette. An e cigarette is considered a suitable alternative to regular cigarettes as it is devoid of tobacco. Besides, electric cigarettes are also free from the highly offensive second hand smoke, which usually plagues regular cigarettes. Some experts are also of the opinion that smoking enthusiasts may prefer opting for filter cigarettes as in India, the craze for e cigs has not really picked up.

The experts are also of the opinion that the big tobacco manufacturers in India possess the pricing power. They have, in the recent past, increased the prices of their cigarettes and still managed to rake in sizable profits from their sales. With the hike in excise duties on cigarettes, tobacco companies may take a short term hit in terms of their profits but in the longer run, they shall be always in profit and smiling their way to the bank. It has been confirmed that even before the excise hike was announced, ITC had planned to launch a cigarette which was shorter than 65mm, thereby ensuring that the hike in taxes does not affect its sales in any way. Nonetheless, the move to raise the excise duties on cigarettes shall certainly help smokers in India seek healthier alternatives, such as an e cigarette.