The Economy of Loose Cigarettes

Loose cigarettes to be bought or sold in any country other than the third world countries & obviously India is a crime. I was trying to figure out why is it a crime to sell or buy loose cigarettes? What is so wrong about it that the developed nations categorize it as a CRIME. And if it is such a crime why don't we recognize it as a crime when more than 60% of cigarettes sold in India are loose.

So Swaminomics got the better of me & I got behind this to understand the economics & logic behind this. India is probably one of the largest cigarette/bidi markets in the world. We sell over 100 billion sticks of cigarettes & 800 billion sticks of bidis annually so that makes it close to 8 billion cigarettes & 64 billion bidis in a month. Phew, that got the smoke coming from my ears. India smokes man, like nobody's business. Over 85% of excise revenues collected in India amounting to whopping 8500 crores come from the tobacco industry alone. But the insight is not in this, it is about the excise revenue which never comes to the GOI (Government of India, what did you think) 

That's exactly what the loose cigarettes add up to. Now lets take a closer look, I smoke the Gold Flake king size which for a pack of 10 costs INR 40. This has all the excise revenues & other taxes added in it. When I go to buy a loose GF I pay 4.50 INR per stick. That's 5 Rs. more per pack of 10 or 0.50 Rs. for each stick which goes absolutely unaccounted for. A quick math here will say that considering 100 billion sticks of cigarette alone ( I am not calculating loose bidis) sold every year of which close to 60% are sold loosely, the amount of excise & tax loss to the exchequer is close to a whopping 300 billion Rs. Add the bidi figures to it & you could be zapped. Phew, smoke coming out of my ears again.

So after all the math, now I realize why its a crime to sell or buy loose cigarettes in developed nations. And why they are DEVELOPED nations in the first place. And in these times of recession I hope that the GOI reduces the Income Taxes & VAT's & Service Taxes and all the burden on the common man & look at various ways to earn revenues. And loose cigarettes is definitely a good start. Declare it a CRIME Mr. Ramadoss, we are with you. Save us the burden.

Nilesh Ghai