Blitz Bureau
NEW DELHI:
India’s tobacco sector presents a complex economic and public health paradox. As the world’s second-largest producer of tobacco, the industry remains a vital cog in the agricultural and manufacturing landscape, yet it is simultaneously under intense pressure from stringent regulation and a rising tide of health awareness.
Economic anchor
Tobacco is a high-value cash crop that provides a livelihood for an estimated 36 million farmers and farm labourers across the country, particularly in states like Andhra Pradesh, Karnataka, and Gujarat.
Despite occupying only a small fraction of the country’s arable land, the sector is a significant revenue generator. The industry contributes tens of thousands of crores in tax revenue to the central and state governments through excise duties and GST, and generates substantial foreign exchange earnings through exports of unmanufactured tobacco.
For many small and marginal farmers, particularly in dryland areas, tobacco offers higher and more stable returns compared to alternate crops. The government, through the Tobacco Board, actively works to promote exports and ensure fair prices for farmers, highlighting the sector’s crucial socio-economic role.
Policy push against use
However, the sector operates under one of the world’s most aggressive public health campaigns. India has a high prevalence of tobacco use, particularly of smokeless products like gutkha and khaini, which dominate consumption, especially in rural areas. These products are a major contributor to oral cancer cases, creating a massive burden on the national healthcare system.
In response, the Government has adopted a multifaceted approach:
* Strict regulation: The Cigarettes and Other Tobacco Products Act (COTPA) mandates large-format pictorial health warnings, prohibits the sale of tobacco products to minors, and bans direct and indirect advertisements.
* Taxation: Tobacco products are subject to high taxation, a key strategy under the World Health Organisation’s MPOWER package, aimed at reducing affordability.
* Bans: The Government has banned Electronic Nicotine Delivery Systems (ENDS) like e-cigarettes to prevent youth uptake.
Market dynamics
The organised cigarette market is an oligopoly, largely dominated by four major players, with one company holding the lion’s share. However, a significant portion of the total market, especially for bidis and chewing tobacco, remains unorganised, complicating taxation and regulatory enforcement.
The legal cigarette industry faces continuous challenges from high, often unpredictable, tax hikes and, critically, from a burgeoning illicit trade in smuggled and counterfeit cigarettes. This illegal market undercuts legitimate players, evades taxes, and undermines public health warnings.
The future of the sector hinges on a delicate balance: Providing a transition path for millions of tobacco farmers to move to alternate crops while effectively mitigating the massive public health risk associated with tobacco consumption.