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Now, duty-free cigarettes may be stubbed out

Financial Express, India

Now, duty-free cigarettes may be stubbed out

By Swaraj Thapa

20 November 2008

New Delhi/Soon, those Benson & Hedges’ and Dunhills picked up from a duty-free shop could burn a large hole in your pocket, if health minister Anbumani Ramadoss has his way. The minister, who is running a relentless battle against tobacco use, has lit another fire against smoking. This time, he has moved a proposal to take cigarettes off the duty-free list.

The suggestion is part of a comprehensive tobacco policy he has drafted. The twin-edged draft aims to cut down the sale of tobacco products and trim the operating space for tobacco companies.

The minister from Tamil Nadu has enhanced his sphere a wee bit. He proposed that all types of tobacco products should be placed in the negative list of the free trade agreement (FTA) between India and Sri Lanka. This, he claims, will put a stop to easy access of cheap tobacco and tobacco products. The health ministry has claimed that once its draft becomes policy, dumping of tobacco products from abroad would come to a halt. Although FTAs with most countries do list tobacco products in the negative list, they have been kept out of the purview of the agreements with countries like Sri Lanka.

Ramadoss, the most vocal enthusiast for clamping down on tobacco consumption, has also favoured keeping tobacco products off export promotion and special economic zones. But the commerce ministry has its reservations on that.

The health ministry also wants taxes on tobacco products scaled up so that duty differences based on cigarette lengths is removed.

But the finance ministry feels a blanket policy will be counter-productive. The ministry has argued that such a policy will breed inefficient production and reduce competition for better quality cigarettes, besides keeping the door ajar for smuggling. A better way, it has argued, would be to impose higher excise duties on tobacco products.

Obviously, conscious of the political ramifications, the health minister has opted to leave bidis untouched, except for observing that lower rates of taxation on them only facilitates easy access to a harmful product. He, however, seems determined to see a review of the policy that made cigarettes a part of the duty-free package in commitment made by India under WHO-FCTC. Among the objections to the proposal is that it will be detrimental in the interest of tourism development.

The tobacco industry has already decided voluntarily to implement stricter packaging norms on tobacco products from December 1.