Taxing tobacco products have always remained the jersey cow for governments all over the world to milk up revenues. What has made me to write this blog post is the fact that recently our government has decided to raise excise duty on cigarettes from 11% to 72% giving the age old moral justification of its concern towards the health of smokers and how it will discourage the practice of smoking.
During the last five years cigarette prices have doubled due to repeated hikes already and it has failed to convince any significant amount of smokers to quit smoking. Historically we have seen that a rise or fall in cigarette prices doesn’t decreases or increases its demand substantially just like the essential commodities such as fuel, food etc. Such a big hike will perhaps moderate the smoking habit of some of the smokers for sometime but would not contribute to the large numbers of ex-smokers, which government is aiming for (acting to aim for).
It is astonishing to know that Government has decided not to increase any excise duty on BEEDI which is widely smoked all over the India by the lower income groups mostly and contributes to over 40% (cigarette’s consumption is approximately 14%) of the total tobacco consumption. Discrimination towards beedi may irk some beedi smokers as it contains more carbon monoxide, tar and three to four times more nicotine than regular cigarettes which makes beedi smokers more vulnerable. 😉 Perhaps government is trying to appease the beedi smokers or it certainly doesn’t cares about them at all.
Liquor is also considered bad for health (in India at least) but successive governments in Goa (state with lowest taxation on liquor in India) have backed the idea of cheap liquor acting as a catalyst for its tourism industry sufficient enough to demolishing any argument raising the health concerns of citizens of India. It brings us back to the argument that, why government has only raised excise duty on cigarettes and not on beedis, if it is so concerned about the health of its people?
After China, India is the second largest producer of tobacco in the world. Indian Tobacco products earn a whopping annual sum of more than 11000 crores to the Indian national exchequer by the way of excise revenue and more than 2000 crores through foreign exchange and almost 85% of this revenue is paid by Cigarette smokers only. So, even if cigarette consumption reduces to 5-10% (generous assumption) government still stays on the winning side of inflated revenues. Hence, it justifies government’s move to raise excise duty on cigarettes if we see through the glasses of economics but the time government starts justifying the hike morally it doesn’t sounds less than a chicanery.
Having said that, nobody ever started smoking because it is cheap and nobody will quit because it is now expensive. “Mujhe koi fark nahi padta but it’s a good business to invest in right now.” My smoker friend Himanshu Srivastava who is also an MBA graduate quipped.
P.S: Above write up doesn’t confirms that I endorse the idea of smoking as healthy and neither am I promoting it in any way possible.