1. Centre’s tobacco policy sclerotic? How else do you explain negligible taxes on bidis, chewing tobacco

Centre’s tobacco policy sclerotic? How else do you explain negligible taxes on bidis, chewing tobacco

Government policy on tobacco is becoming increasingly sclerotic. On the one hand, budget after budget raises taxes on cigarettes on grounds that smoking is bad for health, causes cancer and even kills.

By: | Published: September 2, 2017 4:27 AM
Tobacco, Cigarettes, cancer, health, Government policy Government policy on tobacco is becoming increasingly sclerotic. On the one hand, budget after budget raises taxes on cigarettes on grounds that smoking is bad for health, causes cancer and even kills.(Image: Reuters)

Government policy on tobacco is becoming increasingly sclerotic. On the one hand, budget after budget raises taxes on cigarettes on grounds that smoking is bad for health, causes cancer and even kills. When, inadvertently, after the GST rates were first announced, and levies on tobacco fell, the GST Council which comprise the central and state finance ministers quickly got together to fix this. Indeed, the debate over the type of warnings on cigarette packs and their size on cigarette packs has also been informed by this same concern. Yet, if health concerns were top of the mind, how do you explain the almost-negligible rates of taxation on other tobacco products like bidis, chewing tobacco or loose tobacco for hookahs that comprise nearly 90% of tobacco consumption in the country?

While cigarettes end up paying an excise duty of around 50%, bidis get taxed at around 2-3% once you take into account the various exemptions given to those produced by units under a certain size and chewing tobacco pays around 5-6%—VAT rates differ from state to state, but are roughly 26% for cigarettes and 8-10% for bidis and chewing tobacco. As a result, while the share of cigarettes in total consumption of tobacco has halved from around 20% in the early 1980s, there has been little drop in overall consumption—the acreage under tobacco has risen from 3.5 lakh hectares across the country in 2001-02 to around 5 lakh hectares today, production is up from 5.5 lakh tonnes to 8.4 lakh tonnes. The government, in fact, has a Tobacco Board whose job, among others, is “sponsoring, assisting, co-coordinating or encouraging scientific, technological and economic research for promotion of tobacco industry”.

If this wasn’t bad enough, a few months ago, the home ministry revoked the  Public Health Foundation of India’s (PHFI) FCRA clearance—without this, it cannot receive foreign donations for its work—for diverting its funds for various ‘undesirable activities’ like lobbying the media, parliamentarians and the government (yes, the FCRA order mentioned lobbying the government) on tobacco control policy issues which is prohibited under FCRA. While PHFI denied anything more than an outreach programme of its research on the ill-effects of tobacco—lobbying, in the traditional sense, implies paying for getting work done—surely this should be welcomed if tobacco causes cancer?

And now, a Reuters report talks of the government rejecting FCRA clearance for one Michael Bloomberg charity that was trying to ‘target’ the tobacco industry and ‘aggressively’ lobbying against the sector. Given the lakhs employed in tobacco cultivation and bidi making, it is understandable if the government wanted time to move farmers to other crops—but the fact that crop area is rising and that non-cigarette consumption is taxed so lightly suggests this is far from true. In which case, can we get clarity on what the government’s policy is—to encourage or discourage tobacco?

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