Financial Daily from THE HINDU group of publications
Thursday, Mar 11, 2004
Agri-Biz & Commodities
Marketing - Advertising
Anti-Tobacco Law: `Ad ban will rob consumers of informed choice'
Kolkata , March 10
THE tobacco industry, which contributes Rs 7,000 crore to the central exchequer by way of excise, and also provides livelihood to some 2 million people, besides supporting lakhs of tobacco farmers in Andhra Pradesh and Karnataka, is expected to take a hit from May 1, when the Anti-Tobacco Law, totally banning all advertising, will come into effect.
Overall industry view is that it all depends on how effectively such bans are enforced by the State authorities. More often than not, it is felt, such bans impact only on the organised sector and public companies, which take their responsibility to stakeholders seriously.
Senior industry professionals are of the view that the Government should consider each measure carefully and formulate rules appropriate to Indian conditions and in an executable manner, and after full consultations with industry.
According to Mr Amit Sarkar, Director, Tobacco Institute of India, the ban on advertising will deprive consumers of knowledge to make an informed choice. "Consumer pull will give way to trade push, and choice will become more dependent on price and distribution."
Pointing out that competition would be price-led, he said cheaper, low quality cigarette products will prosper and it would be almost impossible to successfully market with lower nicotine and tar.
Describing the measures as premature, he said even WHO's Framework Convention on Tobacco Control (FCTC), which India ratified recently, allowed a period of five years to implement the measures.
Mr Sarkar said industry was also not consulted regarding the time required to remove all the advertisings, which are already in place.
Besides various designs and types, including illuminated boards and plastic skins for displaying advertising, in lakhs of shops spread throughout the country, there are also contractual obligations.
Pointing out that two months were not enough for even the most well-intentioned advertisers to fulfil such a legal requirement.
Senior industry professionals feel the legitimate cigarette sector was getting discriminated vis-à-vis bidis and chewing tobacco units. Calling for a level playing field, Mr Kurush Grant, CEO of ITC's tobacco division, told Business Line that cigarettes were already a highly taxed commodity and the coming into force of the new Sapta (South Asia Preferential Trade Area) agreement among SAARC countries may encourage cigarette smuggling through the porous Indian borders in a big way.
Cross border tax differentials in products such as cigarettes can lead to massive arbitrage opportunities for local smugglers, he added.
He said this happened with Nafta and EU, and may well happen here.
Rationalisation has taken place only in customs duties and nothing has happened in terms of harmonisation of excise and local laws in South Asian region. This has lead to a dramatic increase in sale of contrabands, he pointed out.
Describing cigarette as only a fringe tobacco product, Mr Grant said over 60 per cent of India's cigarette smokers also consume bidis and chewing tobacco, which were equally harmful to health.
Cigarettes are advertised only in the print media because of the voluntary code of self-regulation practiced by the industry.
According to a senior marketing expert, advertising was an absolute must for conveying product virtues and other necessary product values to the customer.
"When this essential communication vehicle is taken away, the customer will be totally at the mercy of retailers, who may play down the health hazards of smoking, rendering the tobacco consumption control exercise of the government ineffective right at the starting block." Traditionally, at times of ad bans, trade margins soar, and not without reason, he pointed out.
According to Mr Sarkar, the new rules also placed severe restrictions on size, number and content of tobacco advertising at shops/warehouses where tobacco products are offered for sale.
Additionally, it would completely block any opportunity to provide required data to adult consumers of the various choices and new offers to help them make that informed choice.
He said in the Indian context, where cigarettes account for only 14 per cent of tobacco consumption, many may switch to bidis and chewing tobacco, which do not carry health warnings.
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