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Mohan Padmanabhan

KOLKATA, June 16

THE Rs 35,000-crore Indian tobacco industry, while appreciating the renewed efforts of Government to curb consumption of all tobacco products in the country, has expressed serious concern over some provisions of the Cigarette and Other Products (Prohibition of Advertisements and Regulation of Trade and Commerce, Production, Supply and Distribution) Bill 2003, which has now become law. Clarifications have been sought before the rules are framed and implemented.

There is, however, a convergence of views among tobacco majors like ITC, GPI and VST Industries that while bottomlines of the companies would be affected in the short and medium term, if the law is implemented in letter and spirit, the prohibition on sale of tobacco products within a radius of 100 yards around each educational institution was highly impractical, and may force shutdown of most retail outlets in the country, especially in a compact city as Mumbai.

In the process, the very purpose of the law, to achieve control over tobacco consumption, may be defeated, as consumption will shift from the most visible cigarettes to other non-branded unpackaged products as bidis and chewing tobacco, which account for 86 per cent of the total tobacco consumption, and said to be equally harmful to health.

Industry is fully agreed on two major provisions of the new anti-tobacco law: display of tar and nicotine contents prominently on the packs and prevention of sale to minors. But fears have been expressed over the immediate impact of the law as a whole on the distributive trade and the farming community, mainly in Andhra Pradesh and Karnataka. Says Mr Kurush Grant, CEO of the Tobacco Division of ITC: ``The key concern is that the cigarette share of overall consumption, now at only 14 per cent would further come down, resulting in increased movement of contrabands in the domestic markets, and hitting hard both the retailers across the country and tobacco growers.''

Industry majors fear that if tobacco consumers shift from value-added cigarette segment to the low value bidis and chewing tobacco, the demand for superior varieties of tobacco that are required to manufacture cigarettes will come down, eroding the return to the tobacco farmer. Not only will companies' revenues fall, Government's excise revenues too will fall, and without in any way denting the overall tobacco consumption.

Cigarettes, according to TII, contribute nearly 90 per cent of Government's revenues from tobacco, and make up 10 per cent of the excise from the tobacco industry. As cottage industries in the unorganised sector, the bidi and chewing tobacco units are able to slip undetected through the excise dragnet.

Mr Grant felt the timing of the notification of the provisions, essentially to be implemented by States, was the key. While the organised cigarette segment is ready to implement the tar and nicotine labels, as standards are already well established by our testing institutions, is the bidi and chewing tobacco units, which are sold in non-packaged form in the semi-urban and rural outlets ready for this?

As a first step before notification of the new law, he suggested the setting up of an expert technical committee with representation from industry and other advisory bodies such as Central Tobacco Research Institute and the Tobacco Institute of India, to go into the entire gamut of issues. Issues like permissible levels of tar and nicotine and at what frequency the products have to be tested for safe levels and by whom, and of course the setting up of state-of-art labs for this purpose are issues that have to be decided well in advance.

He said there has to be also convergence between the Central law and the state laws, as any conflict between the two may have a deleterious effect on industry as a whole. And above all, we need the laws to choke off the foreign advertisements, beamed into our homes courtesy Doordarshan via Formula-1 racing. Genuine concern is expressed by the industry that the new anti-tobacco law may unwittingly confer on foreign cigarette MNCs an exclusive privilege to advertise their premium brands, which may also significantly boost sale of smuggled brands of these premium foreign cigarettes in India. A major clarification needed here is whether the new Central law will supercede all State laws.

According to Mr R.A. Poddar, CEO of Godfrey Philips, the power of choice may shift from consumer to the trader, which was not desirable. ``The anti-tobacco law has plenty of ambiguities, and is badly worded.'' The power of choice may shift from consumer to trader, and the trade may be face harassment from the State-appointed inspectors, thereby spawning corruption.

He said while it was difficult to quantify the kind of revenue hit the industry may take in the short and medium term, the problems for the distributive trade will be real, especially with the 100 yard rule, and this in turn will affect sale and marketing of the products once the rules are framed and implemented.

``The devil is in the details'', said Mr Ray Noronha, Managing Director of VST Industries. The law may affect the newer players and the going may get tough for new brands launched by smaller players. He said the ``no sale to minors'' provision, a part of the Tobacco Institute of India (TII) marketing Code was already being followed by the organised segment in the strictest possible sense. We put it prominently on all our packs, and our marketing staff keep a strict watch on erring retailers. He called for a pragmatic approach which will look at the interests of the industry, as a whole, and the farmers in particular.

Asked why ITC does not display this on their cigarette packs, Mr Grant said ``we go much beyond this. We come down heavily on any retailer or distributor violating this code, which is implemented ruthlessly by our marketing people''. He felt the law relating to ban on sale to minors should be notified immediately.

The treatment of notification/rules of the new law, as per clause 1(3) of the tobacco Bill, is that ``it shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint and different dates may be appointed for different provisions of the Act''. (To be concluded)

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