ITC jumps 2%, to resume cigarette manufacturing

Shares of ITC jumped over 2 percent intraday Monday as the company will soon resume manufacturing of cigarettes at its factories. The FMCG major had suspended cigarette manufacturing from April 1 over large pictorial warning issue.

"Consequent upon a High Court order passed in favour of the company, the company will soon resume manufacturing of cigarettes at its factories," ITC said in a filing to the BSE.

The Kolkata-headquartered firm had suspended manufacturing at all its five cigarette factories saying there was a lack of clarity in policy regarding printing of larger pictorial warnings on the packets. All other cigarette manufacturers had taken similar decisions.

A notification by the Health Ministry on September 24, 2015, for implementation of the Cigarettes and other Tobacco Products (Packaging and Labeling) Amendment Rules, 2014, had come into force on April 1, 2016. It prescribed larger pictorial warnings, covering 85 percent of packets on tobacco products.

Insisting that "the question of the legality of the new warnings has been and continues to be pending before the Court", the company had said.

It had added the company was "compelled to shut its cigarette factories with effect from April 1, 2016, until clarity emerges in the current uncertain state of the rules on health warning".

ITC manufactures a range of cigarette brands, including India Kings, Classic, Gold Flake, Navy Cut, Capstan, Bristol, Flake, Silk Cut, which are manufactured at plants in Bengaluru, Munger, Saharanpur, Kolkata and Pune.

ITC's smaller rival Golden Tobacco has already decided to resume production.

On April 1, the Tobacco Institute of India (TII), of which ITC, Godfrey Philips and VST are part of, had stated that its members have decided to shut all their factories and stop manufacturing in the wake of larger pictorial warnings covering 85 per cent of packaging space coming into effect.

The companies, which account for more than 98 percent of the country's domestic sales of duty-paid cigarettes in India, put the estimated production revenue loss at over Rs 350 crore per day for tobacco product manufacturers.(With inputs from PTI)