Prevalence of Tobacco usage in India (%) – Age 15-49
In India, around one fourth of population (in 15-49 age group) is addicted to Tobacco in one form or the other and the usage at 57% is very high in male population as compared to 11% in females. The heavy usage is mainly on account of two reasons:
1. Low Prices: Tobacco is available in a number of variants across price ranges to cater to all socio-economic sections of the society; low tax rates in India have contributed to this high affordability.
2. Strong Distribution: Tobacco is available at Pan-Shops situated at all Nukkads throughout the country.
Shahrukh: Why are you seen smoking everywhere
The young people fall in the tobacco net because of cheap prices and widespread availability of the tobacco products and then are not able to get out of this trap due to the addictive nature of Nicotine as shown by the Age vs. Tobacco Prevalence graph given below. The smoking scenes shown in Bollywood movies don’t do any good either as the youngsters just follow the stars to look cool and get trapped.
It is abundantly clear that tobacco consumption is more popular amongst the marginalized sections of society i.e. people who are poor, illiterate and belong to SC/ST castes. So, it becomes much more important for the Government of India to curb tobacco consumption and the bans affected by four states viz. Haryana, MP, Maharashtra and Kerala on chewing tobacco are steps in right direction.
Tobacco Economics in India
The two reasons given by Government for not banning tobacco is the significant tax revenue as well as employment generated through manufacturing and selling of these products. Let’s look at the figures:
The total tax from cigarettes and bidis is Rs. 8,500 crore which is only 2% of the gross tax receipts in 2007 (declined from 3.1% in 1999). In fact, tax rate on tobacco products in India is much lower than that recommended by WHO. There is negligible tax on Bidis and Gutka/Pan Masala as these are normally consumed by economically poor people; the tax on cigarettes at 38% is also much lower than the WHO recommended 65-80% tax on retail price.
It is beyond my comprehension that the Government will keep the tax rate low when it gives tax revenues as one of the main reasons for not banning tobacco products. It seems that the tax rates are actually not dictated by 1) Public Welfare 2) Tax collections; but are dictated by maximization of corporate profits. In fact WHO has slammed a Rs. 250 crore tobacco fine on India for not following the tobacco tax guidelines. Just look at the high PBIT margins of ITC in Cigarette division which are over 30% and have remained in such a high range.
The second reason provided for not banning tobacco products is the employment generated by the sector. As per estimates of a study conducted by Melinda and Gates Foundation; the total employment generated by tobacco industry is only around 70 lakh out of the total 45 crore odd workforce so the employment generated by the sector is only 1-2% of the total employed population. Let’s compare the total employment generation with the number of people affected by these products. Around one million people are estimated to die every year due to tobacco usage alone and it is a leading cause of deaths in 30-69 age group in male population (around 20% die due to tobacco usage).
I am really happy that a few of the states (MP, Maharashtra, Kerala and Haryana) have banned production, storage and selling of Gutkha and Pan Masala but it would be so much nicer to have this ban been affected country-wide. With the ill effects of tobacco consumption so well documented and such insignificant contribution of tobacco tax in the Government coffers, the reasons for not banning Tobacco is beyond my comprehension.
I hope someone can explain it to me… Do you have the answer?