Ashwin, a software manager in Mumbai, almost always buys his cigarettes on the black market. The 36-year-old, who smokes about 15 a day, buys packets that have been smuggled into India from Indonesia through his local paan wallah, someone who sells the traditional Indian chew of stuffed betel leaves.
“It’s all done out of sight,” says Ashwin, who requests that his full name is not published. “I’ll order from him and he sends the cigarettes to my home.”
He says that at 50 rupees (Dh2.75) a packet, he pays about a quarter of the price that he would pay if he bought them through legitimate channels.
High taxes on cigarettes in India, which are intended to reduce demand, have already pushed smokers to buy illegal cigarettes, while new regulations for larger pictorial health warnings on packets could fuel further growth of the illicit trade of cigarettes, the industry claims.
In the latest battle between cigarette manufactures in India and the Indian government, New Delhi has demanded that cigarette cartons would have to display health warnings that cover 85 per cent of the packets, up from 20 per cent. These rules were scheduled to come into effect on April 1, but the tobacco industry filed legal challenges against them.
India’s biggest cigarette manufacturer, ITC, in which British American Tobacco owns a 30 per cent stake, shut its factories in protest for two weeks last month. It also suspended production earlier this month.
Godfrey Phillips, another cigarette-maker, also stopped manufacturing.
Through a state-controlled vehicle, the Indian government owns about 11 per cent of ITC, which also has interests in hotels and consumer goods.
But last week, ITC said it had resumed production and would comply with the government’s demands for larger health warnings.
The final verdict on the matter, however, is still awaited from Karnataka’s high court and is due in the next few weeks.
The government has argued that such moves are designed to reduce consumption of cigarettes and alleviate the negative effect that the habit has on the health of the country’s population.
About 1 million deaths or more in India each year are linked to tobacco, according to scientists and health researchers, while a study on the economic effects of tobacco-related diseases in India conducted by the government and the World Health Organization revealed an annual cost of more than US$22 billion.
Manufacturers, part of the $11bn tobacco industry in India, are concerned that their incomes could be hit hard by the move, which they argue will also affect tobacco farmers.
“Extreme regulations such as pictorial warnings provide further encouragement to the illegal cigarette trade in India, as illegal cigarettes do not comply with tobacco control regulation of the government,” says the Tobacco Institute of India (TII), the industry body which represents farmers, manufacturers and exporters, on its website.
Many of the cartons that come into the country illegally do not display health warnings at all. Packets of cigarettes that are imported into India are also supposed to comply with the regulations.
“Non-adherence of illegal cigarettes with regulations like pictorial warnings lends an impression that they are safer alternatives to their legal counterpart,” according to TII.
It says that “as a consequence of high and discriminatory tobacco taxation and extreme tobacco control regulations in India, legal cigarettes have been on a continuous decline in the country while illegal cigarette trade has grown significantly”.
About 46 million Indians depend on tobacco for their livelihood, its figures show.
In India, only 11 per cent of tobacco consumption is in the form of legal cigarettes, it says. The majority of tobacco is consumed through illegal cigarettes and other forms, such as bidis, which are hand-rolled, and chewing tobacco.
The TII says this results in lost taxes for the government – about 90bn rupees.
“The escalating and unprecedented excise duty burden on legal cigarettes more than doubled in the last four years as a consequence of successive increases in union budgets since [the financial year] 2012 to 2013. In addition, cigarettes continue to bear the brunt of very high rates of VAT and other state -level taxes.”
The tobacco body says that it is not only cigarette manufactures that are hurt by moves such as high taxes and the larger health warnings.
Smuggled cigarettes do not use Indian tobacco, which affects the earnings and livelihood of tobacco farmers in the country, it says.
“The shrinking legal domestic cigarette industry has adversely affected the entire value chain, with Indian cigarette tobacco farmers facing unprecedented hardship. The resulting loss in earnings of farmers and the acute financial distress faced by them has already led to many cases of suicide by farmers in the cigarette tobacco growing states of Andhra Pradesh, Telangana and Karnataka during the last year,” says the TII.
A recent report by Ficci and Grant Thornton also highlighted the problem of cigarettes being smuggled into India, mainly from countries including South Korea, Indonesia, China, Singapore and the UAE.
However, marketing experts say that New Delhi’s efforts could go some way to reducing demand for cigarettes in India.
“The government’s move to increase the size of health warnings on packets of cigarettes in India with an intention of reducing the consumption of cigarettes because of adverse effect on health of consumers may attract the attention of smokers towards the caution message so that they reduce or quit smoking,” says Sanjay Chakraborty, the marketing communication adviser at EssKsee Consultancy, based in Gujarat.
He believes that more drastic measures should be taken and argues that if the government is serious about reducing the harmful effects on the health of the population from cigarettes, it should ban them, pointing to the example of how alcohol has been banned in Gujarat.
Kunal Saxena, the managing director of Rusan Pharma, which makes nicotine patches, also says that the government should do more to reduce smoking.
“We support the government initiative to make the public aware through various mediums including increase in pictorial warnings on cigarette packs,” he says. “We should also incorporate treatments and solutions to this awareness drive. For example, the government can incorporate a toll-free helpline number printed with the warning for people who want to … seek appropriate treatment guidance if they would like to quit.
“A holistic approach will make this effort by the government more substantial.”
Graphic warnings tend to reduce consumption of cigarettes, according to the WHO.
“Studies carried out after the implementation of pictorial package warnings in Brazil, Canada, Singapore and Thailand consistently show that pictorial warnings significantly increase people’s awareness of the harms of tobacco use,” it says.
Ashwin says the cigarettes he buys on the black market do not have any health warnings at all displayed on the packets.
He says some smokers might be put off by such images, but he believes he would continue to smoke regardless of the warnings.
“I don’t think it would make much difference to me,” he says.
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