ECONOMIC IMPACT OF CIGARETTESFacts and Figures

Nicorette, e-stick, etc.

Substitute 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.

Complementary for Cigarettes

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

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.

Facts

Per Capita consumption in India ~ 10% of World average

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Per Capita Cigarette Consumption

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.

Facts

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