Up in smoke!

The Union finance minister reportedly favours additional FDI in cigarette manufacture. Perhaps he has good reasons for pushing this business. His two predecessors clearly did

Mohan Guruswamy Delhi

The only good news from the cigarette industry in recent times has been that after decades of continuous growth, it recorded a decline of 4.1 per cent in sales volume in 1999-2000 over the previous year. We do not know if there was a corresponding decrease in the incidence of cancer and other smoking-induced ailments. That we will never know, because the government, presumably under pressure from the powerful cigarette industry, has not yet conducted a detailed study on this and the consequential cost to the economy in spite of a specific request from the revenue department to enable it to evolve a scientific basis for cigarette taxation.

Whatever be the drop in stick sales, it is evident that rupee sales and profits have not shown any decline. Industry bosses can, like the cigarette-smoking Dev Anand in Hum Dono did, continue to sing “barbadion ka jashn manata chala gaya, har fikr ko dhuein mein urata chala gaya!” (I celebrated every act of tragic destruction and blew my worries away in smoke.)

Objectively speaking, this is not a bad situation at all, and is proof that government policy, whether deliberate or accidental, is still halfway good. For, as far as this industry goes, a good policy will ensure that the State gets more revenues, the companies prosper but not by too much, while the consumption keeps dropping each year.

This decline is accompanied by another silver lining. The consumption of mini cigarettes has fallen sharply by 16.8 per cent. But this does not necessarily mean good news on the health front as dropouts may have switched to bidis. The consumption of regular cigarettes has more or less remained static, having fallen by only 1.7 per cent. Nevertheless, the decline in consumption, attributed by the industry to higher excise duties in each of the previous few budgets, means that the policy is in the right direction and there is a case for increasing the tariffs on cigarettes and bidis once again this year.

Despite this, the numbers are still pretty impressive. The number of cigarettes smoked in 2000 was 71,474 million. This was when India had a PPP per capita income of just $1,354. It is closer to $3,500 now, which suggests that the number of cigarettes puffed would have only gone up. Understandably, the cigarette industry is shy about revealing figures. But we have data from the FAO which clearly suggests this.

The Food and Agricultural Organisation (FAO) estimates that in 2000, total tobacco consumption was about 4,703,000 tonnes. This is projected to rise to 5,638,000 tonnes in 2010. This must be music to the ears of the tobacco industry bosses since manufactured and hand-rolled cigarettes (bidis) account for 85 per cent of all tobacco consumption. The FAO forecasts that in 2010 the share of tobacco consumption in developing countries will come down from 34 per cent to 29 per cent while poor countries will account for 71 per cent. It must be noted that all cigarette manufacturing in India is with MNC-dominated companies and it is the conscious policy of these MNCs to shift their markets to the least developed countries.