Industry estimates of the illegal cigarette trade in India could be vastly overrated, suggests a study published in BMJ Tobacco Control that found that less than 3% cigarettes sold in the market have travelled through illegal channels. Industry estimates, which come out routinely every time taxes on tobacco products are increased, put the figure at 20-25%.
The study collected 11,063 empty cigarette packs from 1,727 retailers across the country and found varying proportions of illicit products across the country. A cigarette pack was classified as illicit if it had a duty-free sign, no graphic health warnings, no textual health warnings or no mention of “price inclusive of all taxes” or similar text.
Empty packs generated by one day’s single-cigarette sales were collected directly from vendors in four large and four small cities covering the length and breadth of India. Ten areas were randomly selected in each city/town, and all shops selling cigarettes within 1 km of the central point were surveyed.
The study concluded: “Our estimate of the illicit cigarette market share of 2.73% casts serious doubt on the tobacco industry estimate of 20% and Euromonitor’s estimate of 21.3%.” The estimates varied substantially across locations, with the highest prevalence of illicit packs in the Mizoram capital of Aizawl (35.87%) near the Bangladesh and Myanmar borders. The share of illicit cigarettes was found to be much higher (13.77%) among the cheapest cigarette brands.
Conducted by researchers from the Centre for Public Policy Research, Kochi, and the School of Economics, University of Cape Town, the study is the first independent estimate of illicit cigarette trade in India. It is significant because raising tobacco taxes are a crucial public health intervention to reduce health effects of tobacco products and because every time this is done, the tobacco industry cries foul and presents its own estimates of illicit trade to highlight how much revenue the government is losing out on.
For example the Tobacco Institute of India, which describes itself as a “representative body of farmers, manufacturers, exporters and ancillaries of the cigarettes’ segment of the tobacco industry in India, whose members account for more than 98% of the country’s domestic sales of duty paid cigarettes”, puts the share of illicit cigarettes at a quarter of the market. “Illegal cigarette trade comprising international smuggled and locally manufactured tax-evaded cigarettes accounts for as much as 1/4th of the cigarette industry in India. Based on the current tax rates on cigarettes, it is estimated that the government loses Rs. 13,000 crore per annum on account of illegal cigarette trade,” states the TII handbook on illicit cigarette trade.
“Tobacco industry always makes tall claims about how huge the illicit tobacco problem in India is and they have been saying that it has been increasing over the years,” Dr Rijo John, senior fellow at the Centre for Public Policy Research, Kochi, and one of the authors of the study, told The Indian Express. “In several countries that claim has worked as a deterrent for the government in taxation. But in India there are no independent studies to validate those claims.”
The study also comes in the backdrop of a Karnataka High Court order that ruled that 40% and not 85% should be the size of the pack warnings. The Supreme Court, which later stayed the Karnataka High Court order, will hear the matter in the coming days.
Dr Pankaj Chaturvedi, oncologist at the Tata Memorial Hospital, Mumbai said: “This article published yesterday is a big blow to the falsehood being promoted by cigarette lobby regarding magnitude of illicit cigarette business in India. For decades they have misled policy makers with fabricated statistics to garner sympathy and derail efforts for higher taxation and pack warning. This proves that statistics forwarded by tobacco lobby should never be relied upon.”