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Indians want their fix of gutkha & pan masala despite ban

Contraband sales up after states banned the manufacture and sale of flavoured tobacco

Viveat Susan Pinto Sounak Mitra & Mahesh Kulkarni  |  Mumbai/New Delhi/Bangalore 

It’s not without reason that India tops the list of smokeless tobacco users in the world with nearly 83 per cent consumers. Indians are so addicted to flavoured tobacco — pan masala and gutkha to be precise — that despite the ban on its manufacture and sale in 11 states so far, consumers are still getting hold of their daily fix, courtesy contraband sales.

The ban in Delhi and 10 other states including Maharashtra, Gujarat, Madhya Pradesh, Chattisgarh, Mizoram, Kerala and Bihar, among others, has resulted in black marketing of the product. This has impacted price, which has gone up significantly.

Consider this: A sachet of branded pan masala such as Rajnigandha (from Delhi-based DS Group) and Manikchand (from Pune-based Dhariwal Group) has almost doubled to Rs 15 from Rs 8 in the last two months. Local brands that cost Rs 2 are now available for Rs 5, while gutkha is available for Rs 3 from Rs 2 earlier.

Local retailers in cities such as Mumbai and Delhi, where there is strict enforcement of the ban, say that prices will continue to climb. "I don't see prices coming down any time soon if there continues to be strict enforcement," says a pan shop owner in central Mumbai. For instance, gutkha prices are likely to climb to Rs 5 from Rs 3 now, some shop owners in Delhi and Mumbai say.

While retailers do not display the product for fear of being caught by the authorities, consumers in search of their fix rarely go home disappointed. A shop owner in Delhi, for instance, says that he continues to sell around 2000-2,500 packs of gutkha per day. "More than half my customers are regular. So even if there's a ban, I am not worried," he says.

But not everybody seems happy with the order pronounced by the 11 states so far. Players such as the Dhariwal Group have moved court challenging the ban on flavoured tobacco in Maharashtra. Company officials while choosing not to come on record say that pan masala and gutkha cannot be considered as food products. That way, they argue, these products will not be governed by the Food Safety & Standards Authority of India (FSSAI).

Maharashtra had issued the ban on gutkha and pan masala this July under the Food Safety & Standards Act of 2006 on the grounds that these products when consumed were injurious to health. The notification issued by the state had said that paan masala contained chemicals such as magnesium carbonate, while gutkha contained chemicals such as zinc among others. These chemicals are said to be cancer-causing.

But the fact remains that the gutkha and pan masala industry in India is huge pegged at anywhere between Rs 15,000 to Rs 20,000 crore. There is also a tax impact as a result of the ban.

At the time of pronouncing the ban, Maharashtra deputy chief minister Ajit Pawar had said that the state would lose Rs 100 crore in tax from gutkha and pan masala. Interestingly, Maharashtra tops tobacco consumption in India with 43 per cent adult men and 19 per cent women addicted to it, according to the Global Tobacco survey. The survey also pointed out that around 3.82 crore people consume gutkha in India.

Beetelnut growers suffer due to ban
While players lobby hard for the ban on gutkha and paan masala to be reversed, a key argument that they present is the impact on betelnut or aracanut growers. Arecanut is produced in two varieties — red and white. The red variety is the most preferred in the manufacture of gutkha, while the white variety is used for consumption of pan.

Thanks to the ban on gutkha, the consumption of the red variety of aracanut has taken a hit. Prices are down by about three per cent to Rs 134 in major markets such as Karnataka and Kerala.

According to A S Bhat, former MD of the Central Arecanut and Cocoa Marketing and Processing Cooperative Ltd (Campco), the arecanut trade contributes about Rs 4,000 crore to Rs 5,000 crore annually to state and Central exchequers by way of VAT, Central Excise and Customs duty.

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First Published: Sun, September 16 2012. 00:41 IST