Ban on Tobacco Ads by the Government of India

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Themes: Ethics in Business
Period : 1981-2001
Organization : Indian Tobacco Company Philip Morris
Pub Date : 2001
Countries : India
Industry : Food, Beverages & Tobacco

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Case Code : BECG002
Case Length : 8 Pages
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The Nays' Contd...

Scepticism regarding the effectiveness of the ban also stemmed from the fact that the ban seemed to have ignored the reality of the Indian Market. The organised-sector, which mainly produced cigarettes, comprised only 16% of the market, while remaining 84% was accounted for by other products like 'beedi,' 'ghutkas,' etc. The ban was likely to have no major impact on their sales. Analysts felt that ban on ads would reduce the consumers ability to distinguish between products of differing quality, and slow down the progression of Indian consumers up the scale from harmful tobacco consumption (like ghutka, zarda etc.) to more refined forms.

Some analysts pointed out that the ban could lead to spurt in surrogate advertising, which could defeat the very purpose of the ban. Moreover, there seemed to be no sense in imposing such a ban on the domestic players, when the foreign magazines that sold in India and the television channels that were uplinked from foreign countries carried advertisements by cigarette multinationals.

For example Marlboro, which sponsored Formula I racing was very popular with well-to-do Indian youth, even minors. Formula I could be viewed on the sports channels, as they were uplinked from outside the country. Analysts felt that this would put the Indian industry at a disadvantage. The Tobacco industry was a large contributor to the State Exchequer. In 2000-01 it contributed Rs 8,182 crore which was 12% of the total excise revenue. About 90% of this came from cigarettes. India was the world's third largest tobacco maker, with an annual output of 550 million Kg. Analysts were of the opinion that any control may have an adverse impact on the contributions to the state exchequer.

Again, the industry provided direct and indirect employment to 26 million people- of this, roughly 6 million were farmers and almost 5 million were 'beedi' rollers. Stringent measures could cause millions of workers to be displaced. It was also felt that, India, being the third largest producer of tobacco in the world, with all the multiplier effect, and with one of the lowest per capita tobacco consumption in the world, should tread the anti-tobacco path with caution.

Some analysts contested claims that the state had to spend considerable amounts on providing healthcare as a result of smoking induced illness. They pointed out, that in a developing country like India, where the expenditure on public healthcare, insurance and pension systems was meagre, the argument of health costs was irrelevant.

Even allowing that illnesses caused by smoking led to an increase in state spending on healthcare, it could be argued that these illnesses also reduced the state's liabilities on old-age pensions- assuming that those who fall ill would die prematurely as a result.

A number of research studies conducted to determine the relationship between advertising and smoking indicated that advertising did not seem to influence people to smoke (Refer Box). A study conducted by the Center for Monitoring Indian Economy (CMIE), found that there was only a weak correlation between the money spent by cigarette companies on advertisements and the consumption of the cigarette (Figure II).

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