Illicit Trade in Tobacco Products
Vinayak M. Prasad, MD
Director, Ministry of Health and Family Welfare, India
 2007 Johns Hopkins Bloomberg School of Public Health
Section A
Illicit Trade and Public Health: General Overview
 2007 Johns Hopkins Bloomberg School of Public Health
Learning Objectives
What is illicit trade?
How illicit trade impacts on public health?
What contributes to illicit trade of tobacco?
Country case studies
How can illicit trade be controlled?
 Globally accepted strategies
 2007 Johns Hopkins Bloomberg School of Public Health
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Illicit Trade: Definition
Article 1 World Health Organization (WHO) Framework Convention
on Tobacco Control (FCTC):
 “Any practice or conduct prohibited by law and which relates
to production, shipment, receipt, possession, distribution, sale
or purchase including any practice or conduct intended to
facilitate such activity”
Source: World Health Organization. (2003).
 2007 Johns Hopkins Bloomberg School of Public Health
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Why Bother with Illicit Trade?
“Tobacco smuggling undermines national pricing policies,
deprives governments of revenues used to combat
smuggling, permits tobacco companies to subvert
international cooperation in tobacco control and above all,
undermines legal restrictions and health regulations, such as
those that deal with health warnings and sales to minors.”
—Dr. Derek Yach, WHO’s Executive Director,
August, 2002
Source: World Health Organization. (2002).
 2007 Johns Hopkins Bloomberg School of Public Health
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Why Bother with Illicit Trade?
Public health impacts
 Access to cheap tobacco
 Adversely affects tobacco control measures
Economic impacts
 Increases health care costs
 Loss of revenue
 Increase in crime
 2007 Johns Hopkins Bloomberg School of Public Health
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What Leads to Illicit Trade?
Price-tax differentials
Poor enforcement capacity
 Revenue administration/customs
Poor paying capacity of individuals who are addicted to tobacco
 2007 Johns Hopkins Bloomberg School of Public Health
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FCTC Article 15
Recognizes elimination of illicit
trade as essential to tobacco
control
Suggests legislative, executive,
administrative and other
measures
 E.g., Marks and numbers,
tracking and tracing,
exchange of information,
etc.
Text source: World Health Organization. (2003); Image source: World Health Organization. (2005).
 2007 Johns Hopkins Bloomberg School of Public Health
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Country Experiences
Raising or lowering taxes: enforcement?
 Canada
 Spain
 U.K. and France
 Bhutan
 India
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Country Experiences
Canada
 Lowering taxes did not deter evasion/smuggling
Spain
 Increase in taxes did not increase smuggling as enforcement
action was substantially improved
U.K. and France
 The higher taxes in the U.K. vis-à-vis France created a greater
incentive to smuggle
 2007 Johns Hopkins Bloomberg School of Public Health
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Bhutan
December, 2004: ban on manufacture/sale
 The first country in the world to do so
The benefits have been marginal—why?
 Porous Indo-Bhutan land border
 Result: thriving black market for tobacco
 Lesson learned: bans will not work in isolation without intercountry strategies
 2007 Johns Hopkins Bloomberg School of Public Health
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India
In 2002 to 2003, India’s share (488,130 tonnes) was approximately
7.5% of world’s consumption of unmanufactured tobacco*
Non-cigarette forms constitute 4/5th of consumption (contrary to
global trends)
Tobacco consumption—high prevalence (47% males; 14% females)†
Source: *United States Department of Agriculture, Foreign Agricultural Service. (2003); †The Tobacco Atlas, 2 nd
Edition. (2006).
 2007 Johns Hopkins Bloomberg School of Public Health
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Types of Tobacco Use in India
Source: National Sample Survey, India, 55th Round. (2000).
 2007 Johns Hopkins Bloomberg School of Public Health
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Tobacco Taxes in India (in Millions of USD)
2003-2004
2004-2005
2005-2006
1099.0
1198.87
1422.0
Bidi
54.4
55.6
47.2
Chewing tobacco
122.6
124.0
130.0
Cigarettes
Source: Global Youth Tobacco Survey. (2006).
 2007 Johns Hopkins Bloomberg School of Public Health
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Trend of Illicit Indian Trade: Cigarettes
Cigarettes
 Multiple tax structure
 Cheaper/smaller cigarettes: less tax
 Shift in trend from Bidi to low cost cigarettes
 Industrial licensing from government
 Control of the manufacture/supply trade by government
 Less incentive for illicit trade/smuggling
 Smuggling to Bhutan from India
 Smuggling from Bangladesh to India
 Free Trade Agreement (FTA) with Sri Lanka
 Foreign Direct Investment (FDI)/Special Economic Zone policy:
could make India the manufacturing hub for the world
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Trend of Illicit Indian Trade: Chewing Tobacco
Chewing tobacco
 India: Oral cancer widespread
 > 30% of tobacco consumed is chewed
 Contrary to evidence of widespread consumption—static
revenue collection
 Rampant evasion/illicit trade/illicit manufacturing of chewing
tobacco
 > 700 cases of evasion of excise duty, involving $100 million
USD (2005-2006)
 High tax incidence (33%)
 Poor enforcement/corruption
 No licensing/no tracking
 2007 Johns Hopkins Bloomberg School of Public Health
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Trend of Illicit Indian Trade: Bidis
Bidis
 > 50% of tobacco consumed in India
 Poor man’s cigarette—negligible tax
 No documented report of illicit manufacturing; evasion of
domestic taxes
 No reports of smuggling to other countries
 Poorly regulated
 2007 Johns Hopkins Bloomberg School of Public Health
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India: Trend of Illicit Trade
No clear estimates of smuggling
Open land borders (more than 5,000 kilometers)
Free movement of people and goods between countries
Smuggling reported from India to Bhutan, Myanmar, Pakistan, and
Nepal
Largely associated with bootlegging
Recent reports of involvement of a few organized syndicates
(Dawood Ibrahim)
 2007 Johns Hopkins Bloomberg School of Public Health
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India: Trend of Illicit Trade
Within India there are . . .
 Best practices of tobacco control for the organized sector of
cigarettes
 Poor control for chewing tobacco
 Poor policies for Bidis
Indicates the need for a more comprehensive approach to tobacco
control within the country in terms of taxation, trade, economic
policy, and enforcement policy
 2007 Johns Hopkins Bloomberg School of Public Health
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