Gov­er­nance: UN against il­licit to­bacco trade

In­dia faces a unique chal­lenge as the UN-backed treaty against il­licit to­bacco trade takes ef­fect in Septem­ber

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In­dia faces a unique chal­lenge as the UN-backed treaty against il­licit to­bacco trade takes ef­fect in Septem­ber

Il­licit cig­a­rette smug­gling has over the years cre­ated a mul­ti­tude of prob­lems for In­dia. It neg­a­tively im­pacts fi­nan­cial health re­sult­ing from tax ar­bi­trage; it has also led to a sharp rise in anti-so­cial ac­tiv­i­ties as el­e­ments ac­tively in­dulging in il­licit cig­a­rette trade are us­ing the pro­ceeds to fund their ter­ror op­er­a­tions. In ad­di­tion, it has re­sulted in the loss and ex­port of jobs which are di­rectly pro­por­tional to the spread of the il­licit cig­a­rette mar­ket and fi­nally, it has a se­ri­ous im­pact on do­mes­tic to­bacco farm­ers caus­ing tremen­dous dis­tress and an­guish. Cig­a­rette smug­gling and coun­ter­feit­ing has been a se­ri­ous point of con­cern for both the gov­ern­ment and in­dus­try as the pen­e­tra­tion of il­licit cig­a­rettes has seen a con­stant rise over the years. There has been a de­cline in sale of le­gal cig­a­rettes be­tween 2011-2017. It is a mat­ter of fact that the le­gal sale of cig­a­rettes in In­dia by vol­ume fell from 110 bil­lion stick units in 2011-12 to 81 bil­lion stick units in 2016-17 and re­cent stud­ies in­di­cate that this is ex­pected to fall fur­ther by 2020. The il­licit cig­a­rette sticks sold in the coun­try as per Euromon­i­tor is ap­prox­i­mately 24.8 bil­lion. The Di­rec­torate of Rev­enue In­tel­li­gence (DRI), based on seizures, has es­ti­mated the mar­ket of il­licit cig­a­rettes to have grown by ` 5,775 crore, mak­ing the il­licit trade mar­ket for cig­a­rettes in In­dia worth ` 25,000 crore. Il­le­gal cig­a­rettes that com­prise of in­ter­na­tional smug­gled and lo­cally man­u­fac­tured tax-evaded cig­a­rettes ac­count for one-fourth of the cig­a­rette in­dus­try in In­dia. The tax bur­den on le­gal cig­a­rettes has in­creased by a mas­sive 202 per cent since 2011-12 as a re­sult of suc­ces­sive in­crease in tax­a­tion. To­day, In­dia is the fourth largest mar­ket in the world in terms of il­licit cig­a­rette sales. We need to be clear about the ground re­al­i­ties in In­dia in­so­far as cig­a­rettes in par­tic­u­lar and to­bacco in gen­eral are con- cerned. In­dia is one of the few coun­tries in the world that has a strong do­mes­tic to­bacco in­dus­try. This in­dus­try pro­vides liveli­hood to 46 mil­lion or 4.57 crore peo­ple. Many vested in­ter­ests are push­ing a pol­icy which is flood­ing the In­dian mar­ket with for­eign cig­a­rette brands that ex­hibit to­tal dis­re­gard for the safety and well-be­ing of our cit­i­zens. This is one rea­son why there is abun­dant avail­abil­ity of cheap il­licit cig­a­rettes from neigh­bour­ing coun­tries, re­sult­ing in in­creased de­mand for smug­gled/il­licit cig­a­rettes. In­dia faces a unique sit­u­a­tion wherein il­licit cig­a­rettes are not get­ting smug­gled out of the coun­try but there is a del­uge of

The Di­rec­torate of Rev­enue In­tel­li­gence, based on seizures, has es­ti­mated the mar­ket of il­licit cig­a­rettes to have grown by ` 5,775 crore, mak­ing the il­licit mar­ket for cig­a­rettes in In­dia worth ` 25,000 crore

il­licit cig­a­rettes com­ing into the coun­try. For the record, most In­dian cig­a­rette brands al­ready have a unique num­ber thereby en­abling them to be both tracked and traced. In my view, the fol­low­ing can help us achieve bet­ter re­sults: Set­ting up fast track courts to dis­pose of mat­ters re­lat­ing to il­licit cig­a­rette trade. Strin­gent penal­ties that should act as a de­ter­rent and smug­glers should be fear­ful of the con­se­quences. There is also an ur­gent need to re­duce the tax ar­bi­trage on cig­a­rettes: the mas­sive price dif­fer­ence be­tween il­licit cig­a­rettes and le­gal ones not only makes il­licit trade ex­tremely lu­cra­tive but it also dam­ages the morale of the le­gal man­u­fac­turer. In ad­di­tion, the state loses on rev­enue and em­ploy­ment which ends up be­ing ex­ported to other coun­tries. It is im­por­tant to un­der­stand that since In­dian cig­a­rettes have no mar­ket over­seas and In­dia is a vic­tim of a del­uge of smug­gled cig­a­rettes in the coun­try, il­licit proto- col/track and trace on this prod­uct must first be im­ple­mented in all those coun­tries from where the In­dian mar­kets are flooded re­sult­ing in mon­u­men­tal losses to the farm­ers, con­sumers, le­gal man­u­fac­tur­ers and the ex­che­quer. It is only af­ter this that In­dia should think about im­ple­ment­ing this pro­to­col on the do­mes­tic in­dus­try. In ad­di­tion from the ex­pe­ri­ence of the WHO Frame­work Con­ven­tion on To­bacco Con­trol (FCTC) pro­to­col im­ple­men­ta­tion, one can see that there is no uni­form im­ple­men­ta­tion of the pro­to­col. This cre­ates an un­even reg­u­la­tory en­vi­ron­ment which un­scrupu­lous play­ers ex­ploit to push prod­ucts from the less reg­u­lated coun­tries to those which are ex­ces­sively reg­u­lated. Fi­nally, it is im­por­tant to un­der­stand that there is no sin­gle sure shot way to tackle il­licit trade in cig­a­rettes; it is the cul­mi­na­tion of a wide rang­ing set of strate­gies that will de­feat this multi-faceted evil. A holis­tic ap­proach, there­fore, is the need of the hour to ad­dress the men­ace of il­licit trade in cig­a­rettes.

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