India's finance minister P. Chidambaram presented the annual budget to the Indian parliament yesterday, proposing a tax increase of 5 per cent on cigarettes.

Cigarette companies, hoping against hope that the government would prove third-time lucky for the industry, were in for a shock with excise duty being hiked for the second time in two years.
From the point of view of a sector which has always been at pains to point out that tobacco taxation was highly discriminatory towards cigarettes, the 5 per cent increase was one burden companies felt they could do without.
"The budget is a huge disappointment. We had hoped the whipping of the cigarette industry would stop this time around," said Nita Kapoor, senior vice president marketing and corporate affairs at Godfrey Phillips India.
"The excise duty hike will further increase the tax differential between cigarettes and other forms of tobacco and result in a fall in cigarette consumption," concurred Udayan Lall, director, Tobacco Institute of India.
Analysts agreed that companies would find it difficult to insulate customers from a price hike. "Firms may resort to selective price increases to offset the duty hike," an analyst said. (pi)