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| Cigarette consumption likely to fall |
| Ranju Sarkar / New Delhi May 21, 2009, 00:26 IST |
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Pictorial health warnings could hurt demand for domestic cigarettes
The demand for tobacco products could fall sharply once tobacco-makers start displaying pictorial health warnings on their products from May 31, to abide by a Supreme Court order on the same issued earlier this month.
On May 6, the Court recorded the undertaking of the government that the Cigarette and Other Tobacco Products (Packaging and Labelling) Rules, including the rules related to pictorial warning on cigarette and tobacco products, will be implemented from May 31 and that there will be no further extensions.
Udayan Lall, director, Tobacco Institute of India —the industry lobby that represents cigarette-makers like ITC — fears that the warnings could severely impact consumption, as it is coming at a time when the economy is not doing well.
Lall suspects the health warnings will spur demand for smuggled cigarettes that have a large market in India because of high taxes on domestic cigarettes.
‘‘The demand for such cigarettes will increase, since they will not carry the health warnings, and will consequently, be perceived to be less harmful,’’ he said.
The Tobacco Institute added that another outcome of the high taxes on domestic cigarettes has been the increasing and substantial availability of tax-evaded cigarettes manufactured by a large number of small units.
‘‘There is no guarantee that cigarettes manufactured by such units will carry the pictorial health warnings — thereby putting the legitimate, duty paid domestic industry at a distinct competitive disadvantage,’’ added Lall
Lall clarified that the Tobacco Institute of India is not advocating removal or dilution of regulations on manufacture and sale of tobacco products. ‘‘The regulations should be equitable, pragmatic and implementable.’’ he said.
‘‘Tobacco control regulations in India should not impede uptrading and the transition from traditional forms of consumption to more contemporary forms. This would maximise economic value per unit of consumption and benefit the government in the form of increased revenue collections,’’ Lall added.
Though India is the second-largest consumer of tobacco, its pattern of consumption is unique. Unlike the rest of the world, where, on an average, cigarettes account for as much as 90 per cent of the tobacco consumed, in India, cigarettes represent only 15 per cent of total tobacco consumption. The balance 85 per cent is fragmented among a host of traditional tobacco products like beedis, chewing khaini and gutka, which, to a very large extent, are produced in the unorganised sector.
As a result of this unique pattern of consumption, a very large percentage of non-cigarette tobacco products are sold in unbranded and unpacked (loose) form. Consequently, such products may not carry the pictorial health warnings.
Nazeeb Arif, the spokesman for cigarette-maker ITC said, “All cigarette packets manufactured on or after May 31 will carry the changed health warnings. This will be a herculean task and we are taking steps to make the necessary changes.”
Some industry experts say the pictorial warning may not work in India, as people buy one or two cigarettes at a time and not always in packets. In smaller towns and cities, cigarettes which are not branded are also sold in large numbers.
Industry analysts say the cost of printing may go up marginally if more ink is used for printing the new labels. But it’s unlikely to impact cigarette-makers profits.
(Additional reporting by Pradipta Mukherjee)
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