Azerbaijan, Baku, Jan. 7 / Trend I.Khalilova /
A government source has said that the price increase on tobacco products at 0.15-0.2 manat for a pack of imported cigarettes in Azerbaijan since the beginning of 2011 is associated with external factors.
"Prices of tobacco in world markets have increased by five percent and of raw materials by six percent," the source said. "Given that Azerbaijan provides only 50 percent of the needs in tobacco products at the expense of domestic production provides, the price increase in world markets affects the production imported by the country."
According to the source, the government believed that the prices of local products will remain unchanged.
The total demand in the local market for cigarettes is about 10 billion pieces of cigarettes, or 900,000-1.1 million boxes, each with 500 packets of cigarettes, per year, while 2,600 tons of cigarettes were produced domestically last year.
Number of smokers is growing in Azerbaijan, as in many countries.
Due to the rapid economic development and the population's growth in terms of prosperity, the Azerbaijanis have shown preference towards global brands for many commodities. This applies to alcoholic beverages, cigarettes and other tobacco products, motor vehicles etc. Azerbaijan imports cigarettes mainly from Russia, Britain and the United States.
"Accordingly, the program to raise the excise tax on tobacco in Russia up to 2014, providing for an annual tax increase by 30-40 percent, also had a direct impact on the growth of prices for Russian cigarettes sold in Azerbaijan," the source said.
Since Jan. 2011, the Russian excise on filtered cigarettes has increased by 36.6 percent or 280 rubles per 1,000 pieces, with an additional 7 percent of the maximum retail price. According to the Center for Development of Higher Economics School, an increase of excise duties on cigarettes may lead to higher prices at 27.7 percent, compared to 12.3 percent in 2008, 15.1 percent in 2009 and 16.8 percent in 2010.
Meanwhile, due to maintaining low prices for cigarettes based on the availability of local tobacco products, importers of foreign brands of cigarettes may not significantly inflate their prices in Azerbaijan.
European Tobacco Baku is the sole producer of cigarettes in Azerbaijan. The company exports its products only in the free economic zones like Dubai and Turkey, due to the increase in the number of tobacco companies in other countries.
Annual production and sales of European Tobacco in the domestic market is around 240,000 -270,000 boxes.
Before 2002, tobacco plants were only in some CIS countries, however, now the cigarettes are produced in each country with a population of over one million people.
Given the decrease in the exports of European Tobacco and the scope of the local market only around 28-31 percent, the company had to reduce the number of produced brands. Previously, the company produced 20-25 brands and it took up to 50 percent of the market. In addition, given the large preference, European Tobacco has introduced new technologies for the production of lighter cigarettes.
European Tobacco Baku was privatized in 1999 by Sorex Management Incorporated. The right of ownership over the 92.5 percent stake in the tobacco plant was transferred to the investor in 2000.
The official exchange rate is 0. 7977 manat to $1 Jan. 7.