Illegal cigarettes in Indian market more than doubled in 15 years

The illicit cigarette trade is picking up in India. The volume of illegal cigarettes sold across the country rose 124 percent in 15 years - from 12.5 billion sticks in 2005 to 28 billion sticks in 2019, according to The Tobacco Institute of India’s (TII) report, based on data from Euromonitor.

The illegal cigarette trade -- including international smuggled and domestically manufactured tax-evaded cigarettes -- accounts for one-fourth of the cigarette industry in India, and is estimated to cost the government a loss of more than Rs. 15,000 crore each year.

India is said to be one of the preferred destinations for international cigarette smugglers, making it the fourth largest illegal cigarette market in the world. The lucrative Indian market for smuggled cigarettes attracts the youth in particular, as they carry international brand names and are low-priced compared to Indian brands.

“The availability of international smuggled cigarettes has spread all over the country as retailers benefit enormously by pushing sales of these cigarettes due to higher trade margins as these cigarettes are offered to retailers at extremely low prices compared to Indian manufacture,” the TII report said.

High taxes on cigarettes and “extreme tobacco control regulations” have led to the growth of illicit manufactures and industry across the country. Products from these units are sold in the market for Rs 1 per stick (filter cigarette) which is “lower than the applicable tax rates, and only possible if taxes are evaded,” the report said.

Legal cigarettes account for just 9 percent of the overall tobacco consumption in the country, comprising products such as chewing tobacco, beedis, khaini and illegal cigarettes. Despite this, legal cigarettes account for 80% of total tobacco revenues.

Over the last 30 years, the share of legal cigarettes to overall tobacco consumption has fallen from 21 percent in 1981-82 to 9 percent in 2017-18. Overall tobacco consumption in India has increased by 47 percent during the same period, indicating a shift towards consumption of illegal cigarettes, the TII report said.