Illicit tobacco: Here is what this new study has revealed

By: | Published: January 18, 2018 5:14 AM

Packets with 12 cigarettes were also treated as illegal as India has only packs of 10 and 20. The study analysed 11,063 empty packets collected from 1,727 retailers and found just 2.73% could be classified as illegal.

Big Tobacco in India has, time and again, cited massive losses of tobacco revenue from illicit cigarette sales to argue against higher taxation on cigarettes as also larger pictorial warnings on the packet. (Reuters)

Big Tobacco in India has, time and again, cited massive losses of tobacco revenue from illicit cigarette sales to argue against higher taxation on cigarettes as also larger pictorial warnings on the packet. The Tobacco Institute of India notes that illegal cigarette trade comprising smuggled international brands and locally manufactured cigarettes that evade taxes account for a fourth of the cigarette industry in India. It pegs the revenue losses from the sale of illicit cigarettes at Rs 13,000 per annum. But findings of a study published in The BMJ contradict this. The researchers, Rijo M John of the Centre for Public Policy Research in Kochi, Kerala, and Hana Ross of University of Cape Town, Cape Town, South Africa, claim that, against industry claims of a 20-22% market-share for illicit cigarette, the market-share may be as low as 2.73%. Also, the share of illicit cigarettes was the highest for the cheapest cigarette brands.

For the study, empty packs from one-day sales of single cigarettes were collected directly from three classes of vendors—brick-and-mortar shops, paan shops and tea shops—in four large and four small cities across the country. The study treated cigarette packets that either had a duty-free sign, or no graphic health warnings, or no textual health warning, or no mention of ‘price inclusive of all taxes’ or similar text as illegal. Packets with 12 cigarettes were also treated as illegal as India has only packs of 10 and 20. The study analysed 11,063 empty packets collected from 1,727 retailers and found just 2.73% could be classified as illegal.

The highest share of illicit cigarettes came from Aizawl, a city that shares it border with Myanmar and Bangladesh. Next was Kolkata, where illicit cigarettes from South Asian countries can enter from the sea. While 97.3% of the packs bore the “Made in India” sign, 1.94% and 0.61% displayed “Made in Myanmar” and “Made in Indonesia” signs. The rest were variously of Korean, English, French, Nepalese and Swiss make. Nearly 1% bore a duty-free sign and 2.7% had no MRP mentioned. Nearly 1.7% had no graphic health warning and just 0.33% had no textual health warning. Against such findings, and just close to 3% market-share for illicit cigarettes, it is hard to argue against higher taxes on cigarettes—though, to meaningfully crack down on tobacco, the government must raise taxes on beedi and chewing tobacco, too.

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