Implications of the imposed ban on the sale of loose cigarettes in Sri Lanka

By Tishani Sripathi

Sri Lanka has been one of the first countries to ratify the Framework Convention on Tobacco Control (FCTC) treaty in 2003, which sets out recommendations to governments around the world to eliminate tobacco consumption as set out by the World Health Organisation (WHO). 

Sri Lanka has also embraced many of these recommendations and is now considered to be one of the most highly regulated markets in the world. The recent past has seen a drastic increase in taxes on legal cigarettes forcing the prices to shoot up by 43%. The aim of the increase, according to policymakers was twofold, namely that it would generate more tax revenue for the Government and also result in the reduction of the consumption of cigarettes.

The impact of the tax increases and in turn the increase in prices of an individual cigarette has resulted in the decrease in sales of legally manufactured cigarettes, impacting the volumes of the sole cigarette manufacturer in Sri Lanka; Ceylon Tobacco Company (CTC). The desired effect of the decrease in cigarette consumption could then be thought to have been achieved; however, the ever-present alternatives to legal cigarettes have changed the relative outcome in reality. 

Lower income groups, smokers who are pressured by the high prices and the youth are seen to have switched to cheaper alternatives such as the hand-rolled tobacco called “Beedi”, the ingredients of which are not well known. In addition to this, Beedi is comparatively under regulated and is considered by policy makers and the anti-tobacco community as a ‘local cottage industry’ allowing it to enjoy a far less challenging environment when compared to cigarettes. 

A vast majority of smokers also moved to the readily available smuggled cigarettes, which flooded the local market almost overnight as a result of the high prices in legal cigarettes. In the face of this alarming increase in the number of smuggled cigarettes reportedly coming into the country, the law enforcement authorities have conceded that only one in ten such smuggled cigarettes fall under the radar of the law. 

Recent studies have indicated that over 450 million smuggled cigarettes have evaded the law and reached consumers. The health impact of these unregulated substances is just as critical if not even more so to the wellbeing of society at large. As a result, the revenue generated by the tobacco industry has experienced a drastic fall by and this decrease in tax revenue will only widen according to Roshan Madawala, Founder of the Research Intelligence Unit (RIU), as quoted in the Daily News (21 March). At a recently held press conference, tobacco retailers also pointed out that they experienced significant losses as a result of the price hike. 

The latest proposal in order to combat the consumption of cigarettes is the ban of the sale of “loose” or single cigarettes and a ban of the sale of cigarettes within a 100-metre radius of schools. The impact of these developments could indeed be drastic. The ban on the sale of single cigarettes will have many implications both on the consumer habits as well as the retailers. 

According to the retailer association, many smokers buy cigarettes mainly in twos and threes, and these are bought daily by from the local road-side shops. The ban would mean that these consumers would now be forced to buy a whole pack of cigarettes, which in theory, would mean that smokers would reduce their consumption of cigarettes in line with the goals of the Health Ministry. 

However, in reality this will not be the case. Most smokers also buy cigarettes in twos or threes as a method of controlling their daily consumption. Being forced to buy a whole packet now means that they will now have more cigarettes on them and as a result be tempted to smoke more. Also, many smokers will resort to buying Beedi or smuggled cigarettes, both of which are priced much lower and are freely available. 

While the intended consumer behaviour remains unchanged, or rather changed for the worse, a ban on the sale of single cigarettes would affect the smaller retail shops where such loose cigarettes are commonly sold. 

According to the tobacco retailer’s association, these shops usually generate income from the foot traffic of smokers who drop in to buy a cigarette or two about three to four times a day. Such retail shops earn a profit out of the other purchases made by these customers, who also buy food items, tea or other snacks. 

A ban on the sale of loose cigarettes can thus be said to largely impact the income of these small retailers. In a developing economy such as Sri Lanka the prospering of such entrepreneurs is imperative and banning of the sale of loose cigarettes as proposed would have a negative impact on the economy, in terms of the earning capacity of the majority of these retailers.

So the question which remains to be answered is if imposing bans such as this instead of well thought out, sustainable policies would in effect address the Government’s two-fold goal of a) increasing tax revenue and b) decreasing smoking levels. 

Does the ban effectively help in reducing or eliminating smoking in the country (being the main objective of the proposed agenda) or will people resort to other methods such as pooling when buying a pack of cigarettes, buying cheaper smuggled cigarettes, or resorting to buying Beedi, thus causing the desired effect of the ban to be null and void? Not to mention the more critical impact on the economy as a whole and the less considered income groups such the small retail shop owners whose livelihood directly depends on the sales made from these products.

Government policy such as this may backfire in the long run if a well-thought-out follow up plan is not put in place in order to address the residue debris, which the ban would leave in its wake.

(The writer is a law student and business writer. She can be reached at [email protected].)