Tobacco is a labour intensive crop providing large scale agricultural employment and remunerative farmer earnings with significant contribution to the national economy. India is the 2nd largest producer of tobacco in the world providing livelihood to 45.7 million people in the country.Tobacco products generate a significant share of the country’s tax revenues amounting to more than Rs. 72,000* crores annually. In addition, foreign exchange earnings through the export of tobacco & tobacco products garner more than Rs. 12,000 crores annually.
Recognising the enormous socio-economic benefits of tobacco, large tobacco growing/exporting countries have adopted balanced and reasonable policies towards tobacco control. For example, countries like USA, Indonesia, Argentina etc. have not even ratified the WHO’s Framework Convention on Tobacco Control (FCTC).
On the other hand, India, has been more extreme in its approach, implementing regulations which go beyond the requirements of the FCTC which is a framework and non-binding on the Governments. This ignores the socio-economic importance of Tobacco and the impact of such regulations on the livelihood of millions involved in the Industry.
Despite India being the 2nd largest tobacco producer and a major exporter, tobacco control measures in India have always been equally or more stringent than in many developed countries from the time of the enactment of the Cigarettes (Regulation of Productions, Supply and Distribution) Act, 1975 (1975 Act) and the Cigarettes and Other Tobacco Products (Prohibition of Advertisement and Regulation of Trade and Commerce, Production, Supply and Distribution) Act, 2003 (COTPA) to the present.
The important role that tobacco plays in India’s economy, dependence of millions on this Industry for livelihood, as also the country’s unique pattern of tobacco consumption needs to be recognized. India’s tobacco control policies and regulations need to be specifically tailored to Indian conditions. They should not be based on a “one size fits all” approach, as advocated by WHO’s tobacco control programme, which is based on a Western model.
The tobacco consumption pattern in India is unique in that only 10% of total tobacco is consumed in the form of Legal Cigarettes. The remaining 90% consumption is in the form of 29 cheaper tobacco products such as bidis, chewing tobacco, khaini etc and illegal cigarettes. This is unlike the rest of the world where tobacco consumption is synonymous with cigarettes which account for as much as 90% of total consumption.
Moreover, the legal cigarette industry in India is in the organized sector, is licensed and is completely compliant with all tobacco control and other regulations while non-cigarette products are largely produced in the unorganized sector where compliance and enforcement are extremely difficult.
Consequently, the thrust of tobacco regulations is on the small legal cigarette segment of the tobacco industry providing a huge impetus to the illegal cigarette trade which is non-compliant with regulations in the country. According to Euromonitor International – a well-respected research organization – India is now the 4th largest market in the world. Illegal cigarettes now account for as much as 1/3rd of the legal Industry.
Source: Euromonitor International, 2024
Since illegal cigarettes do not adhere to government regulations, the growth in illegal cigarette trade undermines the tobacco control policies of the government and deliberately creates the impression that these products are safer than the legal, regulation-abiding domestic products. Moreover, illegal products do not use local tobaccos and hence, an increase in illegal trade impacts the livelihood of tobacco farmers in the country as demand for domestic tobaccos reduces further.
These unintended consequences of extreme tobacco control regulations in India only underscore the need for the government to have policies/regulations which are equitable, rational, pragmatic and implementable. Given the rapid escalation in the growth of illegal products and the consequent impact on tobacco control policies of the government, there is an urgent need for the Government to make systemic policy intervention to ensure that regulations do not lead to uncontrollable adverse consequences for the Legal Industry and those engaged in the tobacco supply chain.
Moreover, extreme regulations produce counter-productive results. They do not reduce demand for tobacco, but merely shift it from the legal segment to cheaper, regulation non-compliant illegal options of suspect quality, thereby undermining public health objectives. The legal cigarette share of total tobacco consumption in India has declined from 21% in 1981-82 to 10% in 2023-24.
Tobacco Consumption in India (Million Kgs)
|
Year |
Legal Cigarettes |
Other Tobacco forms* |
Total* |
|||
|
Million Kg. |
Share | Million Kg. | Share | Million Kg. |
Share |
|
|
1981-82 |
86 |
21% | 320 | 79% | 406 | 100% |
| 2023-24 |
62 |
10% |
543 | 90% | 605 | 100% |
| Difference | -24 (-28%) |
+223 (+70%) |
+199 |
|||
Source: USDA; Tobacco Board, Govt. of India; FAO; Industry estimates
*Other tobacco products include illegal cigarettes
Therefore, a balance should also be drawn between India’s regulatory priorities and the larger interest of the country, the millions of people who are dependent on tobacco for their livelihood and the legal industry which contributes significantly to the exchequer. Besides, government efforts should focus on education and awareness creation programmes that have proven to be more effective in controlling tobacco consumption.
Excessive Restrictions have resulted in many undesirable consequences in the World
The imposition of excessive regulations on tobacco has created a multi-billion dollar illegal cigarette trade globally, fueling organized crime, robbing governments of much needed tax revenue and undermining tobacco control objectives. According to the World Health Organization (WHO), one out of every ten cigarettes consumed globally is illegal. Acknowledging the undesirable consequences of illicit trade, the WHO further states, “From many angles, the illicit trade of tobacco products is a major global concern, including health, legal and economic, governance and corruption.”
Commenting on the role of Organized crime gangs in Cigarette Smuggling, the International Consortium of Investigative Journalists (ICIJ), says “…Cigarette smuggling has also fostered international crime and money laundering and alarmed growing number of law enforcement officials worldwide. Attracted by huge profits, quick turnovers, a captive market, and relatively light penalties if caught, organized crime now controls large sectors of the smuggling.”
As per the Study ‘Causes and Control of Illegal Tobacco (4th edition): “Evidence demonstrates that increases to tobacco taxes that make cigarettes less affordable contribute to the growth in illegal trade as consumers seek out cheaper products.”
A study ‘Causes & Control of Illegal Tobacco’, 2024, which provides an analysis from 71 countries across 17 years (2005–2022), representing 81% of global cigarette volumes and 91% of global cigarette retail value, excluding China, notes that, when illicit trade gets embedded and established in a marketplace, it becomes difficult to reduce it. The study also emphasizes that Governments cannot rely solely on enforcement to control illegal trade and disregard the more important influence of taxation and affordability.
Therefore, any extreme restriction on a legal product promotes illegal trade and encourages Mafia, criminal and anti-social elements. In fact, illegal trade obstructs economic development, undermines Government health policy objectives and the rule of law. It supports corrupt practices, funds organized crime and terrorism and encourages the expansion of criminal activity.
* Revenue generated by Tobacco products including pan masala as per Lok Sabha, Unstarred Question No. 1499 dated 28th July 2023.
