Tobacco products cheaper than essential food items: WHO study

Seeking to reduce tobacco consumption in the country, a study commissioned by Health Ministry and WHO today recommended increasing tax on all types of tobacco products and withdrawal of tax exemption to 'bidi' manufacturers.

"Prices of tobacco products in the country have not increased substantially over time, thus making these products even cheaper than essential food items," the study said.
The study 'Tobacco Taxes in India: An Empirical Analysis' was conducted by the Institute for Studies in Industrial Development and Public Health Foundation of India, covering the period from 2006 to 2013 and including cigarettes, bidi and smokeless tobacco (zarda /kimam/surti, paan masala and chewing tobacco) products.

It has recommended that the tax on all types of tobacco products should be increased substantially and tobacco tax regime broadened to bring unorganized sector manufacturing in the tax net.

It has also suggested that the tax exemptions on units producing less than two million bidis and tax slabs on cigarettes based on length should be eliminated in a phased manner.

The highlights of the study were shared during a discussion on 'Tobacco Taxation in India' held today.

Noting that tobacco taxation as a fiscal policy was a win-win for both public health as well as revenue generation, Henk Bekedam, WHO Representative to India said, "A comprehensive tax policy leads to reduction in tobacco use, especially among young people, and at the same time provides increased revenues to the government."

The study observed that affordability of tobacco products was increasing at the national level, even in the poorest households in the country, except for recent years.

The current excise and Value Added Tax (VAT) rates are insufficient to increase the prices of tobacco products substantially, making these products easily affordable, it said.

According to the study, the share of tax burden for cigarettes and bidis has declined in recent times. For cigarettes it declined from 55.3 per cent in 2008 to 36.8 per cent in 2013 and for 'bidis' from 7.2 per cent in 2011 to 5.3 per cent in 2013.