Increased taxes and regulation of Indian cigarillos (bidi) industry: Effects on revenue and years of life lost.

Abstract

Indian cigarillos (bidi) are low-cost alternatives to cigarettes with only 22% imposed taxes, and turnover of upto INR 4 million per annum exempted from taxation. This paper estimates revenue implications and potential loss of life years (YLLs) averted, if bidi industry is subjected to increased regulations and taxation. Revenue estimated at 10% increased regulation and 100% regulation were calculated, followed by estimates at taxes equivalent to cigarettes and World Health Organization - Framework Convention on Tobacco Control (WHO-FCTC) recommendation. Price elasticity was considered to assess demand. Price change in separate fractions (previously regulated and unregulated) were calculated to obtain potential YLLs averted. Current revenue of USD 59.25 million is projected to increase to USD 179.25 million with 695,159 averted YLLs at cigarette equivalent taxes and 10% increased regulation; USD 639.38 million with 4,527,597 averted YLLs with 100% regulation; USD 54.75 million, at WHO recommended taxes with 2,233,740 YLLs averted at 10% increased regulation, and 10,486,192 YLLs at 100% regulation. Proposed estimates are inline with WHO recommendations as they consider price elasticity and suggest substantial increase in revenue, while averting YLLs. A national action is needed to drive the policy decisions towards increased regulation and taxation and revision of India's tobacco control legislation. Our study presented empirical evidence of how the currently underutilized tool of taxation, as proposed in the WHO-FCTC, can be utilized to decrease bidi smoking prevalence and save measurable life years while generating government revenue simultaneously. While the revenue statistics counter the misleading tobacco industry narratives, the projected reduction in mortality will be seen as an irrefutable driving force for policy reforms, targeted at strategic increase in regulation and taxation of the traditional Indian cigarillos industry.