India: New Delhi Unmoved by Cigarette Packaging Challenges

Source from:  Financial Times 05/10/2016

India's ITC resumed its cigarette production following several weeks of suspension, after legal challenges failed to sway New Delhi's demand for bigger pictorial health warnings on cigarette packets.

ITC, which sells about four-fifths of the cigarettes smoked in India, suspended its production for two weeks last month and then again last week in order to comply with the new government rules, even as it continues its fierce court battle to nullify the new requirement.

India's $11bn tobacco industry has strongly objected to the new rules that require the antismoking health warnings on cigarette packages to cover 85 per cent of the packet size, up from 20 per cent.

The new rules on health warning sizes — which are similar to the standards set in other Asian countries such as Thailand, Nepal and Sri Lanka — were to take effect on April 1 but tobacco companies filed lawsuits challenging them.

In an order last week, India’s Supreme Court directed cigarette companies to use the larger pictorial warnings until a final verdict on the issue, giving the Karnataka High Court six weeks to make a decision.

In the wake of the Supreme Court order, ITC — which is 30 per cent owned by British American Tobacco — suspended its cigarette production on May 4 while it prepared to meet the new rules, which it said it would obey pending the lower court verdict.

The dispute is part of a wider global battle that has pitted the tobacco industry against governments seeking to discourage a habit that contributes to rising healthcare costs.

The administration of Prime Minister Narendra Modi, who is known for his own ascetic tendencies, announced the new rules for tobacco packet health warnings in October 2014, as part of an effort to discourage smoking.

The World Health Organisation has estimated that nearly 1m Indians die each year of tobacco-related causes. Alongside cigarettes, consumption includes smoking of hand-rolled cigarettes, known as bidis, and chewing tobacco, sometimes included as part of a traditional stimulant known as paan.

The WHO estimates the economic burden of tobacco-related diseases in India is $15bn a year.

However, India's tobacco industry claims the larger health warnings will directly affect 6m tobacco farmers. Overall, the industry said 45.6m Indians depended directly on tobacco for their livelihood, including farm labourers, cigarette factory workers, women who hand roll the inexpensive bidis, and retailers selling tobacco products.

ITC's progressive resumption of production buoyed the tobacco-focused conglomerate's shares on the Bombay Stock Exchange, edging up 1.7 per cent to Rp323 on Monday.

Shares in Godfrey Philips, the India partner of global cigarette maker Philip Morris, also rose 6.8 per cent on Monday, although the company — which also suspended production in April — gave no indication of its plans to resume manufacturing. Enditem