As a new government regulation mandating larger pictorial warnings on tobacco products came into force, tobacco major ITC has announced that it will shut its factories until all ambiguities over the new warnings are settled.
Since Friday, under a new government notification, tobacco products are required to carry larger pictorial warnings covering 85 per cent of the display area on packets.
Insisting that "the question of the legality of the new warnings has been and continues to be pending before the Court", the company said it "did not commit to wasting substantial resources in creating the large number of cylinders and other tools necessary for a change-over of the warnings".
"As a result, the company is at present not in readiness to print the health warnings," the company said in a BSE filing.
"ITC has been 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," it added.
The company also said that the implementation of any change in the health warnings on the cigarette packages is an elaborate process for manufacturers, entailing months of preparation involving substantial cost and effort.
"Since the matter of the new health warning was under the Parliamentary Committee's consideration, and the government had itself held out that it would await the committee's report, the industry was led to believe that the government would re-notify new health warnings after considering the committee's recommendations," it added.
ITC manufactures a range of cigarettes, including India Kings, Classic, Gold Flake, Navy Cut, Capstan, Bristol, Flake and Silk Cut at plants in Bengaluru, Munger, Saharanpur, Kolkata and Pune.
Its consolidated sales from all its cigarette brands amounted to Rs. 17,765.99 crore in 2014-15, which accounted for 46.22 per cent of its net sales of Rs 38,433.31 crore.
The notification issued by the health ministry on September 24, 2015, for implementation of the Cigarettes and Other Tobacco Products (Packaging and Labeling) Amendment Rules, 2014, came into force from Friday.
The ministry had made a commitment to the Rajasthan High Court on March 28 that it will implement the said rules from April 1, 2016.
However, the Parliamentary Committee on Subordinate Legislation had described as "too harsh" the government's proposal that 85 per cent of the packaging surface carry pictorial warnings and recommended that only 50 per cent of the space be taken up by the warning.
The stand had evoked sharp criticism from MPs and health experts.
On Friday, the Tobacco Institute of India (TII), of which ITC, Godfrey Philips and VST are major constituents, had stated that its members have decided to shut all their factories and stop manufacturing in the wake of the 85 per cent warnings coming into effect.
The companies, which account for more than 98 per cent 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 manufacturers.