ECONOMIC IMPACT OF
CIGARETTES
Facts and Figures
Substitute for Cigarettes
 Nicorette,
e-stick, etc.
Complementary for Cigarettes
 Matchstick,
Matchbox
 Lighter
 Sweetener
(Mint)
If the price of the matches and lighters went up, the quantity demanded
would decrease.
Due to this the demand for cigarettes will also decrease slightly.
Facts




Domestic consumption in 2011-12 has increased by
4.19%.
Total no. of units sold in 2009-10 : 1,11,860 million
sticks
Total no. of units sold in 2010-11 : 1,11,487 million
sticks
Total no. of units sold in 2011-12 : 1,16,166 million
sticks
Facts

Cigarettes account for less than 15% of tobacco consumed in India unlike
world pattern of 85% due to prolonged punitive taxation
•
Cigarettes (15% of tobacco consumption) contribute nearly 85% of
Revenue to the government from tobacco sector.

Annual per capita adult cigarette consumption in India is appx. one tenth
world average : 85

Future growth depends on relative rates of growth of per capita income
and moderation in taxes
Facts
A survey done by Union Ministry of Health and Welfare
shows that 49% of men and 17% of women smoke in India.
 50 to 60% of them are youngsters
 “Global Adult Tobacco Survey” tells that on an average a
person spends Rs.500 on smoking if his monthly income is
Rs.1500
 The proportion of income spent on cigarettes is much higher
in the lower income group.

3000
2920
Per Capita Cigarette Consumption
No Of Cigarettes
2500
1886
2000
1771
1500
844
1000
618
488
500
303
243
85
World
Average
India
Bangladesh
Countries
Sri Lanka
Nepal
Pakistan
China
USA
Japan
0
 Per Capita consumption in India ~ 10% of World average
Facts
 Taxation
is the best way to counter cigarettes
consumption
 Rising cigarette tax to Rs 98 per 1000 sticks would add
Rs 36.9 billion to tax revenue and prevent 15.5 million
current and future smokers dying prematurely.
 increasing cigarettes taxes to Rs 3691 per 1000 sticks
would further add Rs 146.3 billion to tax revenue.
ITC Cigarette business

Market leadership

Powerful brands across segments

Leadership in all segments - geographic & price

Extensive FMCG distribution network
 Direct servicing of 1,00,000 markets & 2 million retail outlets

World-class state-of-the-art technology and products
 Investment - Rs.10 billion in six years

Exciting long term growth potential
Economic Impact





Cigarettes smoking is a habit so hard to kick, demand for
cigarettes is highly inelastic
Only large price decrease / increase will shrink / stretch
demand because the demand is inelastic to price change.
When tax is imposed or increased, its burden falls on
consumer.
Substitute product becomes more attractive relative to the
newly taxed product that can be consumed instead.
Income increase can lead to more than proportionate
increase in cigarette consumption.
Thank you