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SMOKE SCREEN

Going Gets Tough for Tobacco Industry

Junaid Kathju
Publish Date: Jun 22 2016 6:12PM | Updated Date: Jun 22 2016 6:15PM

SMOKE SCREEN

The tobacco lobby in India is engaged in a tussle with the Government over pictorial warnings. While the tobacco companies seem to be losing the fight as of now, precedents from similar conflicts globally between the powerful lobby and governments fighting for the health of their people caution that it is too early for celebrations. The billion-dollar tobacco industry won’t go up in smoke just like that, writes Junaid Katju 

 

The narrative of Jeffery Wigand, employee of Brown & Williamson Tobacco Company in the United States, who went live on television in 1995 to expose the lies people had been told for decades about cigarettes: about their capacity to addict, about their capacity to kill. He exposed the murky world of the tobacco companies. Wigand’s damning disposition led to the tobacco industry's 246 billion dollars litigation settlement. However, despite his staggering revelation not much has changed over the years. Today, tobacco is still one of the most lucrative industries the world over. And India is the world’s 2nd largest producer and a major exporter of tobacco with an estimated annual production of 800 million kilograms. 

 

Indian tobacco and tobacco products earn a whopping annual sum of about Rs 10,271 crore. Tobacco products generate significant excise duty and State tax revenues amounting to more than Rs 20,000 crore annually and approximately Rs 5000 crore by way of foreign exchange every year. 

 

With the total of around 0.25 per cent of India’s cultivated land used for tobacco production, the country has 96,865 registered tobacco farmers. There are many more who are not registered or part of the unorganised workforce. As per the data released by the Tobacco Institute of India (TII) the industry provides livelihood to 45.7 million people. 

 

No wonder the tobacco lobby is a rich and powerful one. But with growing awareness about the ills of tobacco, the lobby is often pitted against anti-smoking and anti-tobacco activists. With deep pockets which hold wealth and lawmakers, the powerful tobacco lobby has often managed to ‘convince’ governments to take back decisions which might hamper its business. But this time around, the tobacco industry in India is on the back foot over the issue of displaying larger graphic health warnings on the cigarette/beedi packets.

 

The TII in its efforts to counter the Government’s plan to enforce large graphic warnings recently put up bizarre advertisements in the leading national newspapers of the country. The huge ads proclaimed thus: “Excessive pictorial warnings will adversely impact the livelihoods of 4.6 crore Indians and give a boost to illegal cigarettes”. “Eight five per cent pictorial warnings will encourage the growth of smuggled cigarettes as they do not carry specified warnings. This will create an impression that they are safer than legally produced cigarettes which carry warnings.” 

 

Alas, the TII efforts were in vain as the Government shows no signs of relenting to coercion and coaxing tactics of the tobacco lobby. Further in another blow, the Supreme Court on 14th May refused to permit tobacco manufacturers led by the TII, to clear their old stock manufactured prior to the health ministry's April rule mandating 85 percent pictorial warnings on packets of tobacco products, including cigarettes and beedis.

 

Multinational tobacco companies for years have had politicians and top lawyers in India on their payroll. In the ‘British Medical Journal’, K Srinath Reddy of the Public Health Foundation of India (PHFI) say that some governments in Asia were complicit in protecting the interests of the tobacco industry.

 

The paper titled ‘Tobacco industry lobbying undermines public health in Asia’ identifies India, Pakistan and Laos where the tobacco industry was reportedly targeting to control policies.

 

It stated: “The implementation of tobacco control measures is a political choice. Although tobacco control will improve the wellbeing of the populations that governments serve, the (tobacco) industry spares no attempt to deter, dilute, or delay effective measures for tobacco control, be it taxation or prominent pictorial health warnings”. 

 

A case in point, on 24th March, the committee chaired by Ahmednagar BJP MP Dilip Gandhi, suspended the 85 percent pictorial warning on tobacco packets that were supposed to be implemented from April 1.


Although tobacco is estimated to account for 40 percent of all cancers in men, the 15-member committee, which includes eight from the BJP, made the extraordinary assertion that no study in India had established that tobacco causes cancer. The Supreme Court though later gave the directive that companies would have to adhere to the 85 percent pictorial warnings norm.

 

Tobacco Regulation in India

 

The process of tobacco regulation in India began with the 1975 Cigarettes Regulation of Production, Supply, and Distribution Act that sought to increase cigarette sales. The Act required small text health warnings stating that ‘cigarette smoking is injurious to health’ on the sides of cigarette packages and in advertisements. The Ministry of Health and Family Welfare (MoHFW) saw the warning as far too mild to be effective, but the priority of the Government-of-the-day was to increase revenue from tobacco sales. 

 

There were some well concerted efforts to scuttle any tough regulations on cigarette companies in early 1990s but in 1995, the parliamentary committee on subordinate legislation recommended adding stronger warning labels to all tobacco products. During that period, pro-tobacco-control activism became stronger and NGOs were founded. 

 

In February 1995, the parliamentary committee on subordinate legislation of the 10th Lok Sabha examined the regulations under the Cigarettes Regulation of Production, Supply and Distribution Act from 1975. In December 1995, the committee recommended strengthening the language in the warnings, adding pictures, and extending the warnings to bidis and smokeless tobacco. Because some committee members were industry representatives and did not sign the report it was not officially accepted by the government. 

 

In 2001, the Ministry of Health’s expert committee on the economics of tobacco use concluded that the health costs of tobacco outweighed any economic benefit. In May 2003, parliament passed the Cigarettes and Other Tobacco Products Act (COTPA), prohibiting smoking in public places, establishing smoking and non-smoking areas in hotels, restaurants and airports, curbing tobacco advertising. The Act also directed that by 2007 all tobacco products carry Graphic Health Warning Labels (GHWL). 

 

Massive lobbying by the tobacco industry, battles in courts and all sorts of delaying tactics were employed by the tobacco industry. There was also a conflict between the cigarette industry and the beedi and smokeless tobacco industry. The beedi industry lobbied to be exempted from the news laws. These debates saw many advocate against restrictions on the tobacco industry on the excuse that poor tobacco farmers would be affected. Finally the Supreme Court on 6th May 2009, ruled that the latest set of GHWLs should be implemented on 31 May 2009. 47 GHWLs were finally implemented on cigarette, bidi and smokeless tobacco packs depicting a lung X-ray and an image of diseased lungs for cigarette and beedi packs, and a scorpion for smokeless tobacco packs. Many NGOs protested against the watered down warnings and continued with the fight. 

 

The tobacco industry put up a huge fight but finally on 27th September 2012, the MoHFW amended the GHWL rules to include four additional pictorial warning labels to be used for cigarettes and beedis, together with four additional pictorial warning labels for smokeless packages. The cigarette and beedi package graphic warnings included three images of diseased lungs and one of oral cancer. However, even after the new GHWL rules were announced, the tobacco companies argued that the new labels should only be required on the date of manufacture, not the date of sale. The MoHFW agreed to this stipulation even though the packs do not typically carry the date of manufacture, and as a result, the GHWLs only began to slowly appear several months after they were technically required.

 

Government policy 

 

After the introduction of pictorial warnings on cigarette packets by the Congress-led UPA Government, the BJP Government in its efforts to discourage the use of tobacco has routinely been raising the taxes on tobacco products. 

 

Since July 2014, when Finance Minister Arun Jaitley presented the Government’s first budget, duty on cigarettes has been increased substantially.

 

In the 2015 budget, Jaitley hiked the excise duty by 25 percent on cigarettes of length not exceeding 65mm, and by 15 per cent on cigarettes of other lengths.

 

NDA last year had set a target of reducing tobacco use by 20 percent by 2020 and 30 percent by 2025. According to the Index of Industrial Production (IIP) data, output of tobacco, which includes cigarettes, beedis and chewable tobacco products, declined by 12.1 percent in March 2015 from a year ago.

 

In March of 2015, tobacco output had dipped by 3.8 per cent from March 2013. Between January 2014 and March 2015, the output of tobacco products dipped in nine out of 15 months. Except for the first two months of 2015, it has been on a decline since September 2014. 

 

Government is also mapping out alternative crops out in regions that were engaged in tobacco production, so there would be no great implications for farmers livelihood. The crops identified were onion, chilli, maize and sunflower in Tamil Nadu; sugarcane, soyabean, groundnut and sorghum in Karnataka; potato, maize, wheat and mustard in West Bengal; and maize, sunflower, black gram and chickpea in Andhra Pradesh.

 

However, as the tussle continues – both publicly and covertly – let us examine who besides the multinationals are involved in this lucrative industry, the backbone or workforce and their plight and the economy behind the tobacco industry.   

 

Exploiting the poor 

 

There are around 4.4 million people are working in the tobacco industry. Most of them are largely poor and illiterate. 

 

According to Food and Agriculture Organization of the United Nations, out of the annual wage bill in the tobacco enterprises of Rs 4300 million, the annual wage per worker varied from Rs 8,400 in beedi factories to Rs 55,730 in cigarette and cigar factories. 

 

The various studies suggest that children comprise 15 to 25 per cent of total employment in the industry. The beedi industry, which largely depends on home-based labour for production exploits the workers by not paying minimum wages as stipulated by Government.  

 

As per the economic analysis of the tobacco manufacturing enterprises, the total net value added by all the tobacco enterprises averaged Rs 15,000 million per annum, of which beedi factories contributed 41.2 percent, and cigarette and allied industries 34.3 percent. However, the total annual wage bill in the cigarette and allied industries comprises of only 4 percent of its gross value. In the beedi industry it is 16 percent because of being labour intensive.

 

 Fortune Makers 

 

ITC is the leading company in the Indian tobacco market, holding a 72 per cent share of the market’s volume. The company had an annual turnover of 8.31 billion dollars. The company sells 80 percent of the cigarettes in India, where 275 million people use tobacco products and the total cigarette market is worth close to six billion dollars. 

 

ITC's major cigarette brands include Wills Navy Cut, Gold Flake, Classic, 555, Silk Cut, Scissors, Capstan, Berkeley, Bristol, Lucky Strike, Players, Flake and Duke and Royal. 

 

Godfrey Philips accounts 12 percent of the market’s volume. The company has an annual turnover of approximately Rs 4400 crore, according to the 2014-15 estimate. The company manufactures two brands- Four Square Fine Blend and Tipper. Godfrey Phillips also manufactures and distributes Marlboro under a license agreement with Philip Morris.

Use and Impact of Tobacco in India 

 

The tobacco problem in developing countries like India is more complex in comparison to other parts of the world. It is easily accessible and consumed in various forms like smoking and chewable form. 

 

Over 120 million Indians smoke, that constitutes 10 percent of the world’s tobacco smokers. Almost a third of Indians—57percent of all men and 11 percent of all women—consume some form of tobacco.  

 

As studies reveal 5,500 adolescents start using tobacco every day in India joining the 4 million young people under the age of 15 who are regular tobacco users. India also sees a steady rise in deaths attributed to tobacco every year. From 1.4 percent of all deaths in 1990 the number is expected to rise to 13.3 percent in 2020.According to the World Health Organization (WHO), India would have the highest rate of rise in tobacco related deaths during this period, compared to all other countries /regions. The WHO in its report says tobacco-related diseases cost the country 16 billion dollar annually. 

 

Top leading Tobacco companies 

ITC Company

Godfrey Philips 

Kanhayya Tobacco Company

M R Tobacco

Sudarshan Tobacco


Black Market 

 

As per the FICCI’s reports on counterfeit products, the grey market for tobacco products has almost doubled since 2010. The report reveals that about Rs 5,000 crore to about Rs 13,130 crore of existing industry losses, and about Rs 3,000 crore to government loss of revenue has incurred between 2010 and 2014.

 

According to TII, India was the fifth largest market for smuggled and counterfeit cigarettes, accounting for about 20 per cent of overall cigarette industry in India. 

 

The illegal cigarette trade accounts for as much as 1/5th of the Cigarette Industry in India, causing in an annual revenue loss worth Rs. 9,000 crore.

 

Keeping in view the extremely high increase of tax rates on Cigarettes, the black marketing provides a profitable opportunity for tax evasion thereby encouraging growth in illegal trade. As a result, illegal cigarette trade has almost doubled since 2004 in the country and currently represent 22.8 per cent of the Industry.

 

Conclusion 

 

Despite being dropped because of aggressive industry lobbying, India was also the first country to seriously consider and implement a skull and crossbones image. The GHWLs proposed in India in 1995 were advanced for the time when only Iceland had GHWLs, writes  Sujatha Sankaran, Heikki Hiilamo and Stanton A Glantz in their research paper titles ‘Implementation of graphic health warning labels on tobacco products in India: the interplay between the cigarette and the bidi industries’. 

 

One of the tobacco industry’s main strategies in developed as well as developing countries when faced with curbs has been to emphasise the importance of local farming communities. The Indian tobacco companies to continue to make similar claims arguing that livelihood of the farming community, an enormous sector of the Indian economy, would be endangered by GHWLs. A 2001 expert committee convened by parliament on the other hand concluded that in the long run, tobacco cultivation and use drained economic resources rather than adding to them. The tobacco industry is using the same strategy of equating tobacco regulation with harm to farmers in India that they have used globally, despite evidence to the contrary.