Economics of Smokeless Tobacco in India

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Hemant Goswami talked about the "Economics of Smokeless Form of Tobacco." This presentation is part of the talk about how smokeless variant of tobacco is overtaking the smoked version of tobacco. …

Hemant Goswami talked about the "Economics of Smokeless Form of Tobacco." This presentation is part of the talk about how smokeless variant of tobacco is overtaking the smoked version of tobacco. Strategies and possible actions are also being discussed.

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  • Dear Hemant,
    Many thanks.
    As always, very creative, well researched and indeed immensely helpful contribution.
    Dr. Rakesh
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  • 1. Challenges And Strategies For Tobacco Control Economics of Smokeless Tobacco Products
  • 2. Smokeless Tobacco?
  • 3. Smokeless Tobacco • Gutka • Mawa • Paan Masala • Khaini Smokeless tobacco is a complex chemical mixture, including not • Snus only the components of the tobacco leaf but also chemicals • Gul added during the manufacturing process. Smokeless tobacco contains the addictive chemical nicotine and more than 20 • Bajjar cancer-causing chemicals, including the potent tobacco-specific • Dantmanjan nitrosamines. The National Toxicology Program of the National Institutes of Health (USA) has concluded that oral use of • Other Chewing smokeless tobacco is a human carcinogen. Therefore, Tobacco Forms smokeless tobacco is not a safe alternative to cigarettes. In fact, smokeless tobacco use begins primarily during early • Etc… adolescence and can lead to nicotine dependence and increased risk of becoming a cigarette smoker.
  • 4. India’ Global Scenario and India’s Role • India – All Forms • Sweden - Snus • Norway – Snus • USA/ Canada – Growing markets • Small consumption in other parts of the world
  • 5. Prevalence of Smokeless Tobacco - Canada Canada
  • 6. India- Consumption Pattern India Overall Figures:- Above 10 Yrs who chew tobacco Rural – 19.3 (M) 9.3 (F) NSSO – 15 Urban – 9.9 (M) 4.3 (F) years back (93-94) Above 15 Yrs who chew tobacco Rural – 31.3 (M) 13.8 (F) NFHS – 11 Urban – 20.8 (M) 8.8 (F) years back (98-99) NFHS-2 (IIPS – 2000 data on 30+) Men: 35.4% Females: 18.2%
  • 7. Prevalence • Youth Consumption of smokeless form of tobacco (GYTS) – 14.6% State-level prevalence :: Example (2003) – Delhi: 13.1(M) --- 2.5 (F) – Rajastan: 19 (M) --- 3.8 (F) – M.P: 40.3 (M) --- 14.4 (F) – Bihar: 51.8 (M) --- 6.7 (F) – Mizoram: 60.2 (M) --- 60.7 (F) – Maharashtra: 34 (M) --- 18 (F) – Tamil Nadu: 12.9 (M) --- 10.7 (F)
  • 8. Exports - Production Smokeless tobacco exports: Approx: 252 Crores of Value Smokeless tobacco Production: Nearly 60% of all tobacco is smokeless. India produced a total of 725 million Kg of tobacco last year.
  • 9. Export of Smokeless Tobacco 2009
  • 10. Benefit to the farmer? Farmers hardly gets and benefit or any kind of livelihood support from tobacco cultivation. Less than 1$ a Kg Farmer get just around half of it
  • 11. How is India doing otherwise? Economic Report for 2008-09 mentioned that both tobacco and alcohol are doing exceptionally well; Industrial Growth by Industrial Groups figures show that Beverages and Tobacco grew from 12% in 2007-08 to 15.5% [Weight 3] “8.24: The IIP data indicate that the beverage and tobacco group recorded the highest growth (15.6%) among all two digit industrial groups during 2008-09; that too on top of a strong base. Among the industries subsumed under this product group, cigarette production marginally declined during 2008-09…” [Page: 205-6: Economic Survey 2008-09) Among tobacco products, the growth came from Smokeless and Bidi sector
  • 12. Revenue – Taxation Model Chewing Tobacco and Unmanufactured Tobacco Packing Machines (Capacity Determination and Collection of Duty) Rules, 2010 (Amendment dated April 13, 2010) Useless rules and impractical collection method. Encourages cheap tobacco
  • 13. Faulty Taxation Model for Public Health Objectives • Central Excise Notification No 16/2010, Rate of excise duty leviable under Section 3A of the Central Excise Act on chewing tobacco and branded unmanufactured tobacco (Feb 27, 2010) Sell Cheap Such kind of taxation – Pay harms the poor more than less the rich. Encourages consumption of cheaply priced tobacco and defeats the public health policies on tobacco control.
  • 14. Opposite Directions • Tobacco Board of India
  • 15. Why Smokeless is Increasing? • Increasing Market – Wide Segment • Less Restriction • Virtually No Laws • No Liability • Easy Availability • Easy Transportation • Low manufacturing Cost • Highly Addictive – Repeat Customers • New customers required by the tobacco industry to replace the 5 million dying every year. The survival of the industry depends upon this replacement by making new set of customers hooked to addiction (Assured repeat customers).
  • 16. Market Scenario? • Phillip Morris – Altria already part of the smokeless market • RJR aggressively promoting ‘Snus’ for a long time now • Imperial Tobacco also a part of the smokeless tobacco competitor • GPI recently is in process of launching its first smokefree product in India. Already launched “Pan Vilas”, and set to launch a range of chewing products this year with an investment of up to Rs 125 crore. • Lot of big players getting ready to launch their smokeless products
  • 17. Future Challenges? Smokeless is projected as less harmful/ relatively harmless THIS IS ABSOLUTELY INCORRECT We in India know it very well Philip Morris and U.S. Smokeless Tobacco Co., both parts of the Altria Group Inc., wrote to the FDA (In January 2010) suggesting that tobacco products be ranked on their harmfulness to health. This would most likely result in smokeless tobacco products being ranked as markedly less harmful than cigarettes. Philip Morris apparently claimed the plan would have “a significant public-health benefit.”
  • 18. Industry Strategy? • Grab the market and make gains in a market with no regulations and laws. • Take advantage of low production cost, low procurement price and low taxations • Get as many customers, as possible, within this decade • To promote smokeless as less harmful; confuse the public, divide opinion among public health and government agencies; and play the same tricks as (they did) with Cigarettes
  • 19. How to Tackle Them? • Advocate for proper legislation – important to bring all smokeless form within the scope of law. Important to have watertight regulations and firm policies. MoH has to play a bigger role. Role of Ministry of Commerce has to be transferred to MoH or another agency. • Smokless has to be stopped completely • Complete prohibition on use of smokeless tobacco products • In the meantime – enhanced taxes and rationalization of duties
  • 20. What needs to be Done Urgently? I :- Move for State Government ban on use of smokeless tobacco. Ensure that the intent of the Food Safety Act 2005 (to keep tobacco out of the definition of Food) is achieved; and it is treated as an adulterant. II:- Advocate with the Union Government to have the tobacco board policy in unison with the Ministry of Health objectives III:- Work to make the Union Government completely prohibit chewing tobacco IV:- Target ‘Areca Nut’ too. Isolated success is less likely to come. V: Taxation :: Intermediately – Ensure there is no smokeless tobacco variant in less than Rs. 10 a pouch category (Within next 3 years). Taxation right from cultivation, to auction, to production, to distribution has to be tightened (and recovered). So that there is no cheap variant left. Increase in cost and taxation is not going to have the same relationship; as that of cigarettes. The price is too low, and to achieve a dip in sale/ consumption as a result of price increase, the price has to be increased many folds.
  • 21. Thank You Questions & Answers