With cigarette manufacturing in the country coming to a halt over the use of pictorial health warnings on packets, the government is staring at a potential loss of Rs 100 crore a day despite the fact that India remains among the lowest cigarette consumption market.
Also, Indian cigarette manufacturers use 40% area on cigarette packs for depicting pictorial health warnings against a World Health Organisation’s (WHO) directive of 30%. For the manufacturers too, the suspension of production work has caused losses worth several crores.
Manufacturers like ITC and Godfrey Phillips, among others, have stopped production, demanding a clarity on the government’s stand that the pictorial warnings should be changed every year. Cigarette manufacturers want the duration of each warning to be fixed for at least 2-3 years. Sources said the health ministry would now review the situation on the behest of leading cigarette manufacturers.
The ministry of health and family welfare had notified in May this year that all tobacco product packages in the country must carry pictorial health warnings depicting a cancer-stricken mouth along with the warning “smoking kills” and “tobacco causes mouth cancer”, from December 1, 2010.
So far, tobacco manufacturers have been carrying an image of cancer-ridden lungs with the warning that “smoking kills” without specifying the ills very clearly. The health ministry believes a pictorial warning of mouth cancer could be a tougher deterrent. Currently, there are two existing pictorial warnings—scorpion and damaged lungs.
ITC plunged 3.5% in the early trade on the BSE after the company halted production at all five manufacturing units in view of uncertainty over pictorial warnings. The scrip reacted in a similar manner on the NSE where it declined 3.45% to trade at Rs 165 in the morning session. Both the scrips later recovered—ITC closed at Rs 171.40 while Godfrey Phillips closed Rs 2,029.20
Similarly, another cigarette maker Godfrey Phillips India (GPI) tanked 5.48% to a low of Rs 1,914 on the BSE.
ITC, which makes India Kings, Gold Flake and Navy Cut, said there was no clarity on types of warnings to be carried on the packages.
India remains a highly regulated cigarette market in terms of health warnings, ban on advertising and high rate of taxation. According to WHO, India is one of the 39 of the 193 countries where a mandatory pictorial health warning has been enforced.
Sources said the government earned around n reveRs 27,000 crore inues from various taxes levied on cigarettes and other tobacco products annually. According to industry estimates, organised cigarette manufacturers produce over 110 billion sticks each year and each no-production day means revenue loss worth several crores.
Further, contrary to the perception, a recent report has pointed out that annual cigarette consumption in India is only 99 per adult, which is much lower compared to the higher per-capita consumption in neighbouring countries like Pakistan (390), Nepal (270), Sri Lanka (200) and Bangladesh (170), where there are no mandatory pictorial health warnings on the packs. Also, the cigarette consumption remains very high in countries like Greece (3,000), Russia (2,300), Japan (2,000), China (1,700), and the US (1,200), where the government has not enforced the pictorial health warnings.
“India is an extremely regulated cigarettes market. Tobacco advertising is banned since 2004 and pictorial warnings have been in place for the last few years now. However, the industry employs thousands of workers and the stand-off is not good for anybody,” a Mumbai-based analyst who tracks ITC said.
Meanwhile, experts have dismissed the claims of any co-relation between the presence of pictorial warnings and cigarette sales even as overall sales figure in the country has not registered much growth over the past few years. “There is no growth in the cigarette industry in the country. In fact, cigarettes account for less than 15% of the total tobacco industry while contributing 70% in revenue and it is heavily taxed too,” says Udayan Lall, Director, Tobacco Institute of India.