The Framework Convention Alliance for Tobacco Control

India's tobacco tax hike inadequate

The increase in the tobacco tax rate in the recent Indian budget will have little health benefit as tobacco prices are unlikely to rise markedly, says Dr Monika Arora, Director of the Health Promotion Division at the Public Health Foundation of India (PHFI).

"This budget fails to take full advantage of the benefits of taxing tobacco, which kills one million Indians every year," wrote Dr Arora in an opinion article

The 10-15 percent tax hike also excludes beedis (or bidis), hand-rolled cigarettes. India has more beedi and smokeless tobacco users than cigarette smokers. 

Tobacco cheaper than food

A study released in February by PHFI and the Institute for Studies in Industrial Development found that tobacco products in India are cheaper than essential food items.

The study, Tobacco Taxes in India: An empirical Analysisattributed this to excise and Value Added Tax rates being too low to increase tobacco products’ prices. This means tobacco products are becoming cheaper.

The low tax rates ignore WHO FCTC recommendations that excise taxes should account for at least 70 percent of the retail prices of tobacco products.

Cost-effective strategy

As quoted here, PHFI President K Srinath Reddy said that tobacco taxation policy was the most cost effective strategy for tobacco control and “has the ability to affect consumption, prevalence and affordability. Higher prices of tobacco products can promote cessation and prevent initiation among young people."

The report recommends:

• Tax increases on tobacco products be indexed to inflation.
• Quickly increasing excise duty on all tobacco products.
• Broadening the tobacco tax regime to include the unorganised sector.
• Eliminating tax exemptions on production of bidis.

The report was commissioned by India’s Ministry of Health and Family Welfare.

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