Estimated production revenue loss of over Rs. 350 crore per day for the tobacco product manufacturers
Members of The Tobacco Institute of India (TII), who account for more than 98% of the country’s domestic sales of duty paid cigarettes in India, have unanimously decided to shut all their cigarette factories with effect from April 1, 2016. Owing to ambiguity on the policy related to revision of Graphic Health Warnings on tobacco product packs, the members are unable to continue manufacturing cigarettes from April 1, 2016.
Mr. Syed Mahmood Ahmad, Director, Tobacco Institute of India, said, “The Indian tobacco industry has written to Ministry of Health & Family Welfare on 15th March, 2016 seeking clarification on the matter.”
Fearing, potential violation of rules by continuing production, TII members have decided to shut their factories.
The move will result in an estimated loss of Rs. 350 crore per day in production turnover for the Indian tobacco industry.
NOTE TO THE EDITORS:
Key Points:
- The extreme 85% Warnings will promote illegal cigarette trade and adversely affect the livelihood of 45.7 million people dependent on tobacco which included farmers, labour, workers, trade and others
- Indian FCV Tobacco Farmers are under huge distress on account of shrinking legal cigarette industry due to high taxation and extreme regulations which have led to massive increase in illegal cigarettes
- Illegal cigarettes account for one fifth of the total cigarette industry resulting in annual revenue loss of Rs.9000 crores to the National Exchequer
- Tobacco Control Policies appear to be directed by NGOs and anti-tobacco activists who are funded by overseas vested interests
- Top 5 tobacco producing countries that account for 90% of global tobacco production have an average Warning size of 20%
- The existing Pictorial Warnings at 40% of the front of the pack are adequate to warn and caution consumers
The legal Indian cigarette industry has been facing a continuous drop in demand because of high taxation and the growth of duty evaded illegal cigarettes that do not carry pictorial warnings, thereby creating the impression that they are safer for consumers. As a result, legal cigarettes today represent only 11% of tobacco consumption in India.
The shrinking domestic industry has adversely affected the entire value chain with Indian cigarette tobacco farmers facing unprecedented hardships. The resulting loss in earnings of farmers and the acute financial distress faced by them has already led to many cases of suicides by farmers in the FCV (Cigarette) tobacco growing States of Andhra Pradesh, Telangana and Karnataka.
The revision in the existing warning from 40% of the pack front will adversely impact the already distressed Indian Cigarette Tobacco Farmers, further penalize the regulation compliant Legal Cigarette Industry and provide a huge boost to the large and growing illegal trade in cigarettes in the country.
In a surprising deviation from the global trends, the warning size in India is much larger than the average of 20% among the top 5 tobacco producing countries (China, Brazil, USA, Malawi and Zimbabwe comprising around 90% of global tobacco production) and the global average warning size of 31%.
Moreover, the top three cigarette consuming countries, USA, China and Japan, between them accounting for 51% of global cigarette consumption have only text based warnings (about 30% in size) and have not adopted pictorial warnings.
COTPA, the Parliamentary Act under which the Central Government prescribes the warning, requires that the warning on the package should be legible, prominent and conspicuous and is printed in such a manner that it is visible before the package is opened. Accordingly, a Group of Ministers examined, deliberated and consulted extensively on the issue of the warning, its size and consequences and decided to adopt a pictorial warning occupying 40% of the front panel of the package, including the statements “SMOKING KILLS” and “Tobacco causes cancer”. This warning which more than adequately meets the statutory requirement has been in force since 2009. The proposed change from the GOM recommended Warning is excessive and beyond the provisions of COTPA, and appears to be directed at pleasing the anti-tobacco activists, many of whom are espousing the cause of vested interests. We understand that many of these activists are funded by organizations based in the US where surprisingly till date there is no pictorial warning.
Moreover, the Global Adult Tobacco Survey (GATS) 2009-10, conducted by the Ministry of Health and Family Welfare, had found that within two years of the implementation of Pictorial Warnings in the country, more than 60% of tobacco consumers were already aware of the warnings. With another 6 years having elapsed since then, awareness levels on pictorial warnings are expected to be even higher.
Domestic cigarette tobacco farmers are already facing unprecedented hardships and a continuous drop in demand for their produce due to the shrinking domestic legal cigarette industry on account of high taxation and the growth of duty evaded illegal cigarettes that do not carry pictorial warnings, thereby creating the impression that they are safer for consumers.
According to a recent Study on Illicit Markets illegal cigarettes account for as much as 1/5th of the total Industry denying more than Rs. 9,000 crore of revenue to the National Exchequer. In fact, in recent months there has been a sharp escalation in seizure of contraband cigarettes in the country by enforcement agencies which reveals the focus that contraband smugglers have brought to bear on India due to its extreme regulatory regime on the legal industry.