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 Wednesday, 22 January, 2003, 18:34 GMT
Crackdown on illicit Sri Lanka tobacco
Soldier in Vavuniya
The ceasefire has had a dividend for cigarette firms
Frances Harrison

The Ceylon Tobacco Company which has a virtual monopoly on cigarette production in Sri Lanka, says its sales grew 6% last year after several years in decline.

But it is not that more Sri Lankans are smoking - rather that they have switched from cheap illegal cigarettes to factory-made brands.

For years, Ceylon Tobacco has been trying to combat the threat of illicit cigarettes made cheaply by small local producers who do not pay tax to the government.

Known locally as white cigarettes, the illegal produce costs only one rupee each compared to 2.50 rupees for a machine-made cigarette.

Sales up

Controversially, the Sri Lankan Government agreed to reduce the tax on the cheaper brands of Ceylon Tobacco cigarettes to enable them to compete with the illegal market.

Jaffna Peninsula
Supplies can now go to Jaffna by road

Ceylon Tobacco believes it has helped eat into 30-40% of the illicit white cigarette market.

The result has been a sharp increase in sales and up to 8% more revenue for the government last year compared to the previous year.

Managers at the Ceylon Tobacco Company say there is still room for the government's law enforcement agents to do more to tackle illegal producers, though they say the situation has improved recently.

Free seeds

The company also said it had plans to start growing tobacco in villages bordering the conflict areas in eastern Sri Lanka - taking advantage of the current cease fire and peace process.

Trials have already taken place and from May 150 farmers will be given free seeds and credit to switch from paddy to tobacco.

Meanwhile, the opening of the main north-south highway as a result of the cease fire has meant Ceylon Tobacco can now ensure regular supplies of cigarettes to the northern Jaffna peninsula by road rather than by sea.


Peace efforts

Background

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See also:

28 May 02 | Asia-Pacific
22 Jan 03 | South Asia
26 Sep 02 | Business
21 Jul 02 | South Asia
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