Illicit trade on rise in India, says Ficci-KPMG report

India continues to see rise in illicit trade in tobacco, FMCG, auto components, alcoholic beverages and computer hardware, says a report by industry body Ficci and consultancy firm KPMG. It said the smuggling in India takes place in forms such as mis-declaration, undervaluation, misuse of the end-use and other means.

The seizure value for mis-declaration of goods stood at Rs 1,187 crore in 2016, while that of undervaluation of goods stood at Rs 254 crore, it added. The seizure value from misuse of end use was at Rs 770 crore and that from other means was at Rs 2,780 crore, seeing a rise of 191 per cent, from Rs 953 crore in 2015, it said. "This suggests evolution of means of smuggling in India with the evolution of government policies to deal with smuggling," the report said.

Ficci Secretary General Sanjaya Baru said: "Due to the complexity and alarming growth of the illicit trade, more inter-governmental efforts and public-private alliances are needed to identify approaches leading to the development of a holistic strategy."

The industries plagued by illicit trade, counterfeiting and piracy include tobacco, alcoholic beverages, computer hardware, auto components, FMCG, packaged food items and mobile phones, the report said.

Based on data of seizures from Directorate of Revenue Intelligence, the market of illicit cigarettes trade in India rose by Rs 5,775 crore between 2010 and 2015, making it worth Rs 25,000 crore. The was calculated estimating the value of one stick unit at an average of Rs 10.5, it added.

The report further said in 2014, FMCG personal goods industry suffered an estimated loss of Rs 19,243 crore due to grey market with Rs 5,954 crore loss to the government.

On the other hand, the Indian auto components industry suffered a loss of Rs 10,501 crore in 2014 due to grey market which increased from Rs 9,198 crore in 2012. Quoting a study by Ficci and Thought Arbitrage Research Institute in 2015, the report said the grey market loss to the alcoholic beverage industry stood at Rs 14,140 crore in 2014 which had increased from Rs 5,626 crore in 2012 observing an increase of over 150 per cent.

It further said that in 2014, the computer hardware industry lost nearly Rs 7,344 crore to grey market, while government loss was at Rs 1,923 crore in form of revenues from the computer hardware market.

The major factors driving the growth of illicit trade include higher taxation rates, availability of cheaper alternative, lack of awareness and enforcement mechanisms, the report said.