Tobacco Products In India Research Articles

Price Elasticity Estimates for Tobacco Products in India

The tax base of tobacco in India is heavily dependent on about 14% of tobacco users, who smoke cigarettes. Non-cigarette tobacco products accounting for 85% of the tobacco consumption contributes only 15% of the total tobacco taxes. Though taxation is an important tool to regulate consumption of tobacco, there have been no estimates of price elasticities for different tobacco products in India to date, which can guide tax policy on tobacco. This paper, for the first time in India, examines the price elasticity of demand for bidis, cigarettes and leaf tobacco at the national level using a representative cross-section of households. This study found that own-price elasticity estimates of different tobacco products in India ranged between -0.4 to -0.9, with bidis (an indigenous hand-rolled smoked tobacco preparation in India) and leaf tobacco having elasticities close to unity. Cigarettes were the least price elastic of all. With some assumptions, it is shown that the tax on bidis can be increased to Rs. 100 per 1000 sticks compared with the current Rs. 14 and the tax on an average cigarette can be increased to Rs. 3.5 per stick without any fear of losing revenue. The paper argues that the current system of taxing cigarettes in India based on the presence of filters and the length of cigarettes has no justification on health grounds, and should be abolished, if reducing tobacco consumption and the consequent disease burden is one of the objectives of tobacco taxation policy. It also argues that attempts to regulate tobacco use without effecting significant tax increases on bidis may not produce desired results.

Tobacco control in India.

Legislation to control tobacco use in developing countries has lagged behind the dramatic rise in tobacco consumption. India, the third largest grower of tobacco in the world, amassed 1.7 million disability-adjusted life years (DALYs) in 1990 due to disease and injury attributable to tobacco use in a population where 65% of the men and 38% of the women consume tobacco. India's anti-tobacco legislation, first passed at the national level in 1975, was largely limited to health warnings and proved to be insufficient. In the last decade state legislation has increasingly been used but has lacked uniformity and the multipronged strategies necessary to control demand. A new piece of national legislation, proposed in 2001, represents an advance. It includes the following key demand reduction measures: outlawing smoking in public places; forbidding sale of tobacco to minors; requiring more prominent health warning labels; and banning advertising at sports and cultural events. Despite these measures, the new legislation will not be enough to control the demand for tobacco products in India. The Indian Government must also introduce policies to raise taxes, control smuggling, close advertising loopholes, and create adequate provisions for the enforcement of tobacco control laws.