The central government, in a new draft law, has suggested raising the legal age for smoking from 18 to 21, ban the sale of loose cigarettes and scrap smoking zones and rooms inside restaurants and airports.
The said changes feature in the latest draft of the Cigarettes and Other Tobacco Products (Prohibition of Advertisement and Regulation of Trade and Commerce, Production, Supply and Distribution) (Amendment) Bill 2020 drawn up by the Health Ministry,
The two major changes, if brought about, will severely impact the tobacco industry, whose majors include ITC and Godfrey Phillips.
If introduced, it will also raise the fine on smoking in public places by 10 times -- to Rs 2,000 from the current Rs 200.
This comes as a double whammy for the industry as analysts also predict a hike in GST on tobacco products in the upcoming budget. “In our view, the possibility of GST hike in the Budget or (during) any of the GST council meets remains high given weak government finances amid the current Covid environment,” according to a note by Motilal Oswal.
The ban on the sale of loose cigarettes will also have a significant impact as tobacco companies will find it harder to add more consumers and clear stockpiles.
"The proposed law, if enacted, will make it more difficult to add consumers and affect volumes as sale of only sealed and intact packs will be allowed,” a research analyst with Edelweiss told Business Standard.
A senior government official told The Economic Times that the provision to sell only whole packs was kept to prevent students and those from economically weaker sections from smoking
“Since cigarettes are sold loose, they become economically more accessible to people, especially the students,” ET quoted the official as saying. “At the same time, they miss the messaging and warning on packs,” he said.
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