The Indian government’s draft changes to its tobacco-control law to ban smoking zones in hotels, restaurants, and airports, the sale of loose cigarettes, as well as increasing the minimum legal smoking age from 18 to 21 met with objections from the tobacco industry, farmers, and retailers alike. The objections were raised over concerns about the impact on employment and how farmers could be affected, the adverse impact the new regulations would have on small retail traders and their livelihoods, as well as retail licensing and violation punishments.
Some industry executives say if implemented, the plan will hit sales of companies such as ITC, Godfrey Phillips India, and a unit of Philip Morris International which operate in the country’s US$12 billion cigarette market. ITC’s stock, for example, went down by 3% after news of the new changes surfaced, stopping a steady rally in share price since last November.
The Federation of All India Farmer Associations (FAIFA) said the proposed new changes are unwarranted and would have huge impact on tobacco farmers and workers. FAIFA general secretary, PS Murali Babu, said, “The proposed amendment in the bill seek to introduce excessive and arbitrary restrictions on sale of tobacco products and imposes penalties that are draconian, and we are concerned that it will impair our livelihoods.” He also said that similar amendments were proposed in 2015 but withdrawn in 2017 on the grounds that an amendment should not be introduced until farmers could shift to alternative crops, and that the government has yet to identify and help farmers migrate to other crops.
Retailers also expressed reservations against the prohibitions on tobacco shop locations, saying it threatens to destabilize businesses in urban areas, and that the idea of introducing a licensing regime is impractical and could lead to institutionalized corruption and harassment of small businesses.
However, analysts believe the government’s draft policy is ambitious and may not ever be implemented judiciously, and that the disruption in tobacco companies’ stock is momentary and unlikely to impact long-term investor outlook.