By Sanjay Kumar
With the Covid-19 pandemic hitting the country’s economy hard, preparing the Union budget for the next fiscal year is a major challenge for the government this time around.
In order to set the course for an economic recovery, the government needs funds to invest in the infrastructure and social sectors. An economic slowdown has forced the government to inject stimulus packages. However, government revenues have also dropped significantly. The treasury is thus faced with a difficult task.
Experts from the Ministry of Finance have examined various proposals for drawing up a budget that can use various policies to set the pace for economic recovery. Raising taxes on all tobacco products is one of the options available to them. This will help generate additional revenue during this time of crisis. It will also prove to be an effective political intervention to reduce tobacco use in India and save millions of lives.
The annual economic cost of all illnesses and deaths related to tobacco use in India for 2017-18 is Rs. 177,341 crore, which is 1 percent of India’s GDP. If we take this estimate into account, the economic cost of all tobacco products could be as high as Rs 1.80 billion today.
By increasing the tax on tobacco products, annual income of almost 49,000 rupees can be achieved and their consumption can also be significantly reduced. The government can use the additional income to strengthen health promotion and prevention programs in the wake of the pandemic.
At present, the average price of cigarettes is Rs 127 per pack of 10 cartons. The government can levy an excise tax of 4,170 rupees per 1000 cartons of cigarettes and generate additional tax revenue of 27,423 rupees. According to experts, cigarette consumption will drop by 22 percent as prices rise.
The current average price for a pack of 100 grams of smokeless tobacco product is 102 rupees. The government can generate additional revenue of 3,044 rupees by increasing the tax burden to 76 percent. It will reduce smokeless tobacco use by 29 percent.
Hand-rolled cigarettes, called bidi, are the tobacco product widely used in India because they are cheap. The government must also significantly increase the tax on bidi to reduce their consumption.
The average price for bidi is Rs 20 per pack of 25 sticks. The government will generate additional revenue of 18,249 rupees by collecting 50 Paise tax per bidi stick. This will reduce bidi consumption in the country by 24 percent, experts say.
An increase in the tax on tobacco products is the order of the day. Not only to generate additional income, but also to save millions of lives. Tax increases will also help tackle tobacco comorbidities and the COVID-19 pandemic in India as they will reduce consumption.
Tobacco use is a major risk factor for cardiovascular disease, cancer, chronic lung disease and diabetes. People with these conditions are at higher risk of developing serious illness when infected with Covid-19. Tobacco use is also a major risk factor for infectious diseases such as tuberculosis and lower respiratory infections. Tobacco users are more susceptible to Covid-19 infections. Various studies have found how tobacco use leads to severe Covid-19 manifestations and adverse outcomes. Smoking affects immunity and makes smokers particularly susceptible to Covid-19. With both smokeless tobacco use and smoking significantly increasing the susceptibility and spread of Covid-19, the government has put certain restrictions on the consumption of tobacco products as part of its measures to contain the spread of the deadly virus.
It is well known that tobacco is the world’s most preventable cause of death and disease today, killing half of the people who consume it. It is a global epidemic that kills around 80 lakh worldwide. India is the second largest consumer and third largest tobacco producer.
According to the 2018 Global Adult Tobacco Survey, tobacco use kills at least 12 Lakh Indians each year, while India is home to over 26 Crore tobacco users. One in three rural adults and one in five urban adults uses tobacco in some form. The most common tobacco product used in India is khaini, a mixture of lime and tobacco. One in nine adults or 11.2 percent of tobacco users are dependent on khaini.
At least 7.7 percent of adult tobacco users smoke bidi, and 6.8 percent of tobacco users chew Gutkha, a mixture of tobacco, lime and areca nut. The percentage of tobacco consumers who chew betelquid with tobacco is 5.8 percent. The prevalence of tobacco consumption in men is 42.4 percent and in women 14.2 percent.
Given the level of tobacco use in the country and its adverse effects, the government should increase taxes on all tobacco products. Various studies show that a significant increase in the tax on tobacco products also significantly reduces their consumption.