Economics of Economics of Economics of Economics of

Smokeless Smokeless Smokeless Smokeless

Tobacco Tobacco Tobacco Tobacco

ProductsProductsProductsProducts

Challenges And Strategies Challenges And Strategies Challenges And Strategies Challenges And Strategies

For Tobacco ControlFor Tobacco ControlFor Tobacco ControlFor Tobacco Control

Smokeless Tobacco?

Smokeless Tobacco

• Gutka

• Mawa

• Paan Masala

• Khaini

• Snus

• Gul

• Bajjar

• Dantmanjan

• Other Chewing Tobacco Forms

• Etc…

Smokeless tobacco is a complex chemical mixture, including not only the components of the tobacco leaf but also chemicals added during the manufacturing process. Smokeless tobaccocontains the addictive chemical nicotine and more than 20 cancer-causing chemicals, including the potent tobacco-specific nitrosamines. The National Toxicology Program of the National Institutes of Health (USA) has concluded that oral use ofsmokeless tobacco is a human carcinogen. Therefore, smokeless tobacco is not a safe alternative to cigarettes. In fact, smokeless tobacco use begins primarily during early adolescence and can lead to nicotine dependence and increased risk of becoming a cigarette smoker.

• India – All Forms

• Sweden - Snus

• Norway – Snus

• USA/ Canada – Growing markets

• Small consumption in other parts of the world

Global Scenario and IndiaGlobal Scenario and IndiaGlobal Scenario and IndiaGlobal Scenario and India’’’’s Roles Roles Roles Role

Prevalence of Smokeless

Tobacco - Canada

Canada

India- Consumption Pattern

India Overall Figures:-

Above 10 Yrs who chew tobacco

Rural – 19.3 (M) 9.3 (F)

Urban – 9.9 (M) 4.3 (F)

Above 15 Yrs who chew tobacco

Rural – 31.3 (M) 13.8 (F)

Urban – 20.8 (M) 8.8 (F)

NFHS-2 (IIPS – 2000 data on 30+)

Men: 35.4% Females: 18.2%

NSSO – 15 years back

(93-94)

NFHS – 11 years back

(98-99)

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)

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.

Export of Smokeless Tobacco

2009

Benefit to the farmer?

Farmers

hardly gets

and benefit or

any kind of

livelihood

support from

tobacco

cultivation.

Less than 1$ a KgFarmer get just around

half of it

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

Revenue – Taxation Model

Chewing Tobacco and Unmanufactured Tobacco Packing Chewing Tobacco and Unmanufactured Tobacco Packing Chewing Tobacco and Unmanufactured Tobacco Packing Chewing Tobacco and Unmanufactured Tobacco Packing

Machines (Capacity Determination and Collection of Duty) Machines (Capacity Determination and Collection of Duty) Machines (Capacity Determination and Collection of Duty) Machines (Capacity Determination and Collection of Duty)

Rules, 2010Rules, 2010Rules, 2010Rules, 2010 (Amendment dated April 13, 2010)

Useless rules and

impractical collection method.

Encourages cheap tobacco

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)

Such kind of taxation harms the poor more than

the rich. Encourages consumption of cheaply

priced tobacco and defeats the public health

policies on tobacco control.

Sell Cheap – Pay less

Opposite Directions

•Tobacco Board of India

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).

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

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.”

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

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

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.

Thank You

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&

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