Smokers must cough up more or quit: 10% tax hike in offing

Smokers should start preparing for a whopping 10 per cent increase in 'sin tax' for their poisonous habit - apart from the legal age for buying or using tobacco products being increased from 18 to 25 years, under proposals by the union health ministry.

While the media focus is on the raising of the age barrier to 25 years – the same as for alcohol – the general public knows that this will largely remain on paper. It is the proposed tax hike that will bring on a teary fit of coughing for diehard smokers.

Apart from its ostensible purpose of reducing consumption, the proposed tobacco tax hike will sizeably fatten the government's kitty.

''Since the age of selling tobacco varies from one state to another, we will write to each state government to increase the age for buying tobacco to 25,'' health secretary Luv Verma said at the release of a study by the Public Health Foundation of India, titled 'An Empirical Study of India's Fiscal Policies against Tobacco: A State Level Analysis'.

He added that state governments will be responsible for implementing the move.

The study concluded that a 10 per cent increase in cigarette prices will lead to an almost 3 per cent decrease in consumption, while at the same time swelling the union government's coffers by 7 per cent.

''Based on the recommendations, we will make a strong case for increasing taxation on tobacco,'' Verma said.

He strongly criticised the Tobacco Promotion Board while adding that better coordination is needed between the ministries concerned.

''The commerce ministry's Tobacco Promotion Board is a ridiculous thing. While we are condemning the use of tobacco products, how can they promote it? I will speak to my counterpart in the commerce ministry and see what can be done about it,'' he said.

But of course – like governments around the world – he failed to address the critical issue: if tobacco is so harmful, why not ban its production at source rather than charging addicts more and more for their fix? With a little stretch of the imagination, governments can be compared to drug dealers in this regard.

"Nearly six million people are being killed due to tobacco consumption. So every six seconds in the world one person is dying due to tobacco use, accounting for one in 10 adult deaths," Verma said, citing well-publicised figures.

The study, by the Public Health Foundation of India (PHFI), aims to highlight the need for a health-focused fiscal policy for tobacco, among other things. The study was funded by International Development Research Centre (IDRC).

According to the Report on Tobacco Control in India, 2004, annually eight to nine lakh deaths can be attributed to tobacco use in India, Verma said.

"In addition, 50 per cent of cancers in males and about 20 per cent of cancers in females can be directly attributed to tobacco use," he added.

Quoting a chapter of the study, Economic Burden of Tobacco Related Diseases in India, Verma said: "The global economic cost attributable to tobacco use from all diseases in India in 2011, for persons aged 35-69 years, amounted to Rs1,04,500 crore – of which 16 per cent was direct cost and 84 per cent was indirect cost.''

Verma further said, "Banning tobacco is not the solution as there are a lot of other issues that need to be addressed. Banning would lead to displacement of many labourers who produce tobacco products. It has to be a gradual process."

The study further said that cigarette excise can be increased by as much as 370 per cent of present levels, which would lead to a 54 per cent decline in consumption and a 115 per cent increase in revenue.

Verma did not address the fact that India's few major cigarette manufacturers get away with arbitrary price hikes often twice a year, making windfall profits without any regulatory interference. Some like ITC have become so rich through this that they can diversify into other fields and pretend that their main profits don't come from manufacturing slow poison.