India: Tobacco Companies May Face Steeper Taxes

Source from:  Live mint 09/12/2013

Tobacco companies in India could face steeper taxes with the government planning a series of measures in response to the World Health Organization (WHO) seeking a 30% reduction in tobacco prevalence in the country by 2025.

On Wednesday, Prime Minister Manmohan Singh endorsed WHO’s call for an ambitious tobacco endgame global strategy, which seeks to place tobacco control as the bedrock of policy targeted at reducing mortality due to non-communicable diseases such as cancers, cardiovascular diseases and diabetes.

As a part of the endgame policy, United Nations and WHO are also seeking a 25% reduction in mortality in India related to non-communicable diseases by 2040. The larger target is to reduce global consumption of tobacco-related products to less than 5% of current levels by 2040.

India is the second largest consumer and the third largest producer of tobacco products in the world.

"India is firmly committed to the vision of a tobacco-free society. Apart from causing death and disability in high numbers, use of tobacco imposes serious burden on the economy and the wood fuel needed to cure tobacco leaves are a threat to the environment," Singh said in a recorded message, setting the tone for a two-day international conference on public health priorities in the 21st century in New Delhi.

"We need a multi-sectoral policy with strong political and public action. We must also assist those engaging in tobacco farming to move towards economically viable and alternate livelihoods by developing implementable strategy to stamp out tobacco as a danger to our collective future," he added.

The conference is co-hosted by WHO, the health ministry, and Public Health Foundation of India (PHFI), a health think-tank.

As a part of the endgame strategy, the health ministry will consider measures like heavier excise duty and licensing tobacco sellers to restrict sale. It will also consider a ban on point-of-sale advertising; plain packaging (all tobacco products will be packaged in a standard way), larger font sizes of warnings on tobacco products; and increasing the percentage share of pictorial warnings to 40% on both sides of a cigarette pack.

Currently, only the front of cigarette packs carry pictorial warnings.

In 2011, the ministry of health and family welfare issued a notification requiring pictorial warnings on tobacco products, but experts say such warnings haven’t made much impact on consumers.

Margaret Chan, director general of WHO, called for redefining public health priorities by placing tobacco endgame at the centre of national and international health policies. "Public health has very few opportunities to end health threats in a definitive way. Unlike diseases like malaria or HIV/AIDS, we have a clear opportunity here," she said at the conference. Health minister Ghulam Nabi Azad was present at the conference.

"Taxes are going to be (the) most important measure. Beedis have currently been left out of the tax net and cigarettes also could do with higher taxes," said K. Srinath Reddy, president, PHFI.

"The other important measure is to move farmers into alternative crops. Cigarettes account only for 9% of tobacco consumption. We are hoping for higher excise taxes as the ad valorem tax does not reduce price differentials and is likely to result in brand switching," he added.

According to the Global Adult Tobacco Survey 2012, tobacco kills nearly six million people every year worldwide, of which more than 600,000 are non-smokers exposed to second-hand smoke.

In India, as per the survey, 275 million people—or 35% of Indian adults—use tobacco products in some form or the other. While a large majority of them—21%—use smokeless tobacco like zarda, ghutka or khaini, 9% smoke tobacco and 5% use tobacco in both forms.

According to WHO, smoking killed 100 million people worldwide in the 20th century, and, with currently anticipated consumption patterns, will claim at least one billion lives in the 21st century.

India has a history of raising taxes on tobacco products. In the budget for 2013-14, excise duty on cigarettes was proposed to be raised by about 18%, while in 2012 many states hiked value added tax on all tobacco products.

"We need to determine how change in tax rates of tobacco affect real change in tobacco consumption. Findings of our study show that non-smoking tobacco products and beedis were most price-elastic, but cigarettes have become less price-elastic over the last two decades," said Sakthivel Selvaraj, health economist at PHFI. He also said that 98% of the beedis (considered the poor man’s cigarette) sold in India are not taxed. Enditem