TODAY IS NO SMOKING DAY (From Mohan Guruswamy page)

From Mohan Guruswamy page

TODAY IS NO SMOKING DAY:

THE FUTURE HEALTH COSTS OF TOBACCO ATE GOING TO BE HORRENDOUS AND WILL EXCEED THE REVENUES GAINED TODAY BY VERY MANY TIMES.

WE MUST DO EVERYTHING POSSIBLE NOW TO CURB TOBACCO CONSUMPTION AND PRODUCTION.

I PROPOSE REVENUE TAXES ON LAND USED FOR TOBACCO FARMING.

I ALSO PROPOSE WITHDRAWAL OF ALL SUBSIDIES ON INPUTS LIKE FERTILIZERS.TO TOBACCO FARMING.

I PROPOSE WITHDRAWAL OF FREE WATER AND POWER.

I PROPOSE INCOME TAX ON TOBACCO FARMING INCOMES

DO IT NOW OR GO UP IN SMOKE:

The tobacco market in India was estimated to be worth around $13.5bn in 2009, growing at a compound annual growth rate (CAGR) of 8.5% during 2004-09. Chewing tobacco was the key market in terms of market value accounting for around 55% of the total market value. Cigarettes are the second largest category, contributing to around 44% of the market value. Cigars and cigarillos category witnessed the fastest growth of around 34.6% during 2008-09. While increasing population and rapid economic growth are driving growth in the market, increasing government regulation and taxation, along with smuggling of counterfeit brands of cigarettes are key trends slowing down the growth in the market.

The good news is that per capita consumption has declined from 190 in 1970 to around 100 now. We do not know if there was a corresponding decrease in the incidence of cancer and other cigarette smoking induced ailments. That we will never know because the government, presumably under pressure from the rich and powerful cigarette industry, has not yet conducted a detailed study of this and the consequential cost to the economy in spite of a specific request from the Revenue Department to enable it to evolve a scientific basis for cigarette taxation. Whatever be the drop in stick sales it is very evident that rupee sales and profits have not shown any decline. Industry bosses can like the cigarette smoking Dev Anand in “Hum Dono” did, continue to sing “barbadhion ka jashn manata chala gaya, har fikr ko dhuey mey udhatha chala gaya! (I celebrated every act of destruction and blew my worries away in smoke.)

The decline in cigarette consumption has another silver lining. The consumption of mini cigarettes has fallen sharply by 16.8%. But this does not necessarily mean good news on the health front as dropouts would have switched to bidis and gutka ? This is evident from the fact that tobacco leaf production has increased from 337,100 metric tons in 1970 to 433,400 metric tons in 2000. Nevertheless, the decline in consumption, attributed by the industry to higher excise duties in each of the previous few budgets, means that the policy is in the right direction and that there is a case for increasing the tariffs on cigarettes and bidis once again this year.

Despite this the numbers are still pretty impressive, the number of cigarettes smoked in 2000 was 71474 millions. This was when India had a PPP per capita income of just $1354. It is closer to $3500 now, which suggests that the number of cigarettes puffed would have only gone up. Understandably the cigarette industry is shy about revealing figures. But we have data from the FAO which clearly suggests this. The FAO estimates that in 2000 the total tobacco consumption was about 4,703,000 tons. This is projected to rise to 5,638,000 tons in 2010? This must be music to the ears of the tobacco industry bosses since manufactured and hand-rolled cigarettes (bidis) account for 85% of all tobacco consumption.

The FAO also forecasts that in 2010 the share of tobacco consumption in developing countries will come down from 34% to 29% and the poor countries will account for 71%. It must be noted that all cigarette manufacturing in India is with MNC dominated companies and it is the conscious policy of these MNC’s to shift their markets to LDC’s.

The cigarette industry will, no doubt, argue now that it is not wise to kill the goose that lays the golden egg. In this case it is not a golden egg but a time bomb as each cigarette smoked now implies a future medical cost. Very recently the US government negotiated a $368 billion damages package from the US cigarette industry to pay for future health costs.

It is not that the incidence of smoking is low in India if we take into consideration the widespread bidi habit. The NCAER has estimated that 348 million people belong to households with an annual household expenditure of over Rs.12500. Logic suggests that the vast majority of cigarette smokers must come from this segment. With current cigarette consumption of around 90 billion, we have a per capita consumption of around 100 per year. This is, by any standards, a very high and dangerous figure when you consider that cigarette consumption accounts for only about 25% of total tobacco consumption.

Since thrice as many people consume tobacco either in the form of bidis or gutka we should consider ourselves as fortunate if the equivalent per capita consumption is not around 400 cigarettes a year. When we relate this to the data gathered from a 1994 nationwide survey that revealed that the prevalence of tobacco use among all adult men was 25.7% and 35.3% in urban and rural and means an even much higher average stick consumption among tobacco users.

Another 1996 survey estimates that 150 million males and 34 million females used tobacco in India. This survey also estimates that 112 million persons smoked tobacco, while 96 million used it in its smokeless form. Both forms are just as dangerous and harmful. The National Sample Survey Organization has estimated that when applied to the 1996 population, about 800,000 people died due to their tobacco habit. In the same year medical cases due to tobacco related ailments exceeded 8 millions of which 7.85 million pertain to coronary artery and chronic obstructive lung diseases. It need not be emphasized that these diseases entail higher medical costs and man days lost than cancer.

In a paper presented at a WHO conference in 2002, GK Rath and K Chaudhry have estimated the cost due to the treatment of tobacco related diseases then to be around $6.5 billion. The FAO on the other hand estimates that in 2010 India will lose close to 24 million man years due to tobacco related diseases. This only means that our GNP could be 2.4% higher from 2010 but for tobacco related diseases. In other words, a further loss of $24 billion. This translates into an annual loss of over Rs.150,000 crores, which is quite an astronomical figure.

In stark contrast to this, tobacco related taxation in 2006 resulted in revenues amounting to Rs.8234 crores. Of this Rs.7100 crores was from cigarettes. Quite clearly there is a case for higher taxation on all tobacco products. The cost to the nation is not entirely due to cigarettes and this implies that there is a case for much higher taxation on other tobacco products.

There are several ways of doing this apart from Central Excise. The states could levy a production tax and the state land revenue authorities should reinstate taxation on tobacco agriculture. Contrary to this the government seems to be encouraging tobacco agriculture. It is true that bidi manufacture is a labor intensive business, but it would be quite easy to estimate that the benefits due to this are far outweighed by health costs, most of which are borne by the state. In most developed countries taxes account for 50-70% of tobacco product sales prices. In India it is still around 10%. Clearly there is much scope for more taxation. The World Bank in a series of studies has clearly evidenced that a 10% increase in tobacco product prices will result in an 8% reduction in consumption.

Clearly we need a policy that will, not only address the issue of future health costs and reduce the incidence of smoking, but also curb smuggling. One immediate step the government needs to take is to disallow the manufacture of international brands here. Sale of foreign brands must be banned altogether and ways to deter their stocking and display must be evolved. Japan for instance has such a regulation in place. China, which goes out of its way to attract FDI and with much success, does not allow any foreign investment in cigarettes.

MOHAN GURUSWAMY

Email: mohanguru@gmail.com