Tobacco use growing despite dip in cigarette sales: CTC

Unregulated beedi sector now amounts to 42% market share

Despite a visible reduction in sales volumes of Ceylon Tobacco PLC (CTC), which holds a monopoly in cigarette manufacturing and distribution, the tobacco consumption is growing in Sri Lanka, a top CTC official said.

In the past three years, CTC has witnessed a contraction in the market, with cigarette volume declining over 20 percent—approximately one billion sticks.

“However, the reality is that tobacco consumption is growing but t his growth is fuelled by greater demand and supply of non-regulated, cheaper alternatives such as beedi,” CTC Chief Executive Felicio Ferraz said.

According to him, over the last two years, the beedi sector grew threefold to reach 42 percent of the market share.

“Whilst the growth of the beedi market is of concern to CTC, we believe that the greater issue is one of national importance. On the one hand, a growth in the unregulated market will continue to erode government revenue whilst, on the other, these products carry no health warnings, pay no taxes and remain easily accessible to consumers,” Ferraz noted.

Sri Lanka’s beedi sector remains unregulated and unaffected by regulatory price increases or productbased regulations such as graphical health warnings on packaging.

According to CTC, the beedi trade is at an unfair price advantage as it remains unregulated.

On top of that, frequent excise tax hikes on cigarettes have raised the prices, pushing the consumer for lower priced substitutions, mainly beedi.

Although regulation of the beedi sector has been discussed for many years, it still remains at nascent stage.

“CTC strongly recommends that regulations be i mposed on this segment of the market and calls for the regulatory authorities to construct a level playing field for all, in line with the declarations made in the recent interim national budget,” CTC Chairman Susantha Ratnayake said.

For FY14, CTC’s net profit fell over Rs.500 million to Rs.8.6 billion, amid falling volumes.

The total tax paid by the company to the government for the full year stood at Rs.73.6 billion, down from 4 percent year-on-year.