Peace Pipe Principle

RAM Poddar, CEO of the K.K. Modi-controlled cigarette-maker, Godfrey Phillip India, is trying out some new smoke signals. First-hand experience over the years has taught him the difficulty of trying to change the government's mindset on the tobacco industry. So now, Poddar, also chairman of the Delhi-based Tobacco Institute of India (tii), is touting an ethical filter which he hopes will trap two demons: get the finance ministry to adopt a realistic tax structure to beef up the Rs 28,500-crore industry and silence the anti-tobacco lobby at the same time.

As a first step, the industry has relayed its customary budget proposals, seeking an unchanged duty structure and rates so as to optimise cigarettes' share of tobacco consumption, which has dwindled to 19 per cent this fiscal against 25 per cent a decade ago. The second is perhaps more important from the viewpoint of public health: a self-imposed regulatory code for marketing and advertising of tobacco products in the country. The code is to be supervised and implemented by an ombudsman board made up of representatives from the industry, legal and advertising professionals, bureaucrats and other public figures.

 This is a trendsetting code in the country. Even the liquor industry does not have something like this, claims an enthusiastic Poddar.  We feel stringent self-imposed regulation is the best way to make bureaucrats aware that the industry is doing its best to follow government guidelines. It will also dispel several myths many in this country associate with smoking.

The idea behind the code - to be formulated by a team of specialists - is simple. With the premise that tobacco usage is the personal choice of an informed adult, the institute launched the campaign to seriously discourage minors from smoking. As a result, all major cigarette companies like itc, Godfrey Phillip, Vazir Sultan Tobacco and Golden Tobacco have been informed about a statutory ban on using minors for marketing as well as advertising.  We just do not need any minors in anything that is connected with tobacco. At the same time we believe there is also a serious need to keep the consumers informed of choices available, as well as strengthen brand loyalty and encourage brand shift, says Amit C. Sarkar, director of tii. And apart from the cigarette czars, a sizeable section of the non-cigarette industry which includes gutka, beedi and paan parag manufacturers - are also party to the self-regulation move.

Taking the cue from Phillip Morris, Godfrey Phillip has already kicked off the campaign. Like on its US-based parent's brands, packets of the Indian company's Four Square Kings brand sold in Mumbai carry a terse, one-line message - Not for sale to minors. Market-leader itc is expected to follow suit next month. Pouches of Manikchand gutka also carry the line. Sarada Beedi, which has a significant share in the beedi market, has started printing the letter A (as in adult movies) on packets of their Kadak brand. tii also plans a series of orientation exercises with manufacturers and dealers so that retailers actually implement the advice.

Actually, this is Phase II of a drive that began with a print advertisement campaign that's been running of late. Released by tii through Ogilvy & Mather, the ads play on courtesy and mutual accommodation between smokers and non-smokers. The campaign was ostensibly to counter persistent moves on the contentious issue of  passive smoking by the health ministry and agencies like the World Health Organisation, the Voluntary Health Association of India and the Indian Council of Medical Research.These bodies had based their claims and objections on a controversial report put out by the US-based Environmental Protection Agency. According to that study, cigarette smoke is certified as a Group A carcinogen, or highly toxic. Later, though, a US court ruled that the agency had wrongly classified second-hand smoke in that category.

 We did a lot of research before planning this campaign and our studies showed that contrary to popular belief, non-smokers never intend to create any tension by asking smokers to leave. It's just that non-smokers want smokers to smoke in the area specified. And between the rights of smokers and non-smokers lies the important issue of mutual accommodation, says Vibha Desai, general manager, Ogilvy and Mather.

tii hopes that their voluntary regulation will help avoid situations like the once-proposed blanket ban on tobacco advertising and promotions because on its alleged influence on minors. The government decided against the ban after some intense lobbying by the tobacco industry, highlighting governmental research which indicated that it was factors like parental example, peer pressure, curiosity and lack of education which caused initiation of tobacco consumption among minors and non-users.

Poddar also feels that the moves will change popular perceptions and misconceptions among the Indian public. For example, anti-tobacco campaigns are generally aimed at cigarette consumption. However, that's a direct lift from campaigns overseas, where nearly 90 per cent of tobacco consumption is in the form of cigarettes and holds little relevance in India. That's because here, just 13 per cent of the estimated 200 million adult users of tobacco consume cigarettes.  Over the years, it has become fashionable to gun for the cigarette lobby... We can keep track of only 13 per cent which consume cigarettes. What happens to the rest of the tobacco products? asks Poddar.

The industry has a point to sell to the mandarins in North Block as well. Observers say that if the government takes a long-term view of optimising revenue from tobacco, it ought to leave the duty on tobacco products unchanged in the forthcoming budget. This, they say, will take revenues from excise on cigarette sales off the point of diminishing returns which has been reached. In fact, the shortfall in collections from this sector is estimated to be in excess of Rs 500 crore for the current fiscal. Even viewed from an approach of controlling and curbing tobacco use, observers claim excessive taxation will only reduce cigarettes' share of tobacco consumption and benefit the cheaper traditional alternatives which are also more widely available. In effect, the same amount of money can buy greater quantities, which could in fact increase the consumption of tobacco.

On the other hand, says the tobacco lobby, if cigarettes become more affordable, it could free up more of disposable incomes, which can then be spent on other commodities. Countries like the US and Japan have followed a policy of long-term tax stability while Russia, China and the Philippines have even reduced taxes to successfully generate more revenue without increasing tobacco consumption.

According to Sarkar, the nation should certainly adopt a well-coordinated tobacco policy embracing taxation and educational campaigns which should treat all tobacco products equally and holistically. This has also been recommended by the National Council of Applied Economic Research in a study on the export potential of the sector.

 The government should include tobacco in the extreme-focus category in view of its export potential and adopt a technology mission approach. After all, differential and discriminatory taxation has forced cigarettes into the category of so-called luxury products. As a result, we continue to have this mindset that irrespective of tax, a cigarette smoker would continue his habit. That needs to change now, says Sarkar.

tii claims the huge price differential has increased demand for cheaper alternative tobacco products to grow. As a result, farmers opt to grow low-quality tobacco, given the higher offtake. This means that despite being the third largest grower of tobacco, India has no standing in the world market, since almost the entire consumption abroad is in the form of cigarettes. If nothing else, perhaps finance ministry officials should put that in their pipes and smoke it.