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How governments drive tobacco trade

Tobacco – a colonial addiction

Six companies and sundry State monopolies drive global cigarette consumption. These six companies derive more than US$100 billion dollars in revenues, globally. For many years they were advertising industries largest customers.These six companies are headquartered at former European imperial powers (UK, France, Spain), USA and Japan.

Four tobacco companies and State monopolies control global tobacco trade. (Image source - http://www.tobaccoatlas.org). Click for interactive source map.

Four tobacco companies and State monopolies control global tobacco trade. (Image source - http://www.tobaccoatlas.org). Click for interactive source map.

In recent years, dozens of cigarette manufacturing companies have consolidated under four major private corporations: Altria/Philip Morris, British American Tobacco, Japan Tobacco International, and Imperial Tobacco. State monopolies are also major cigarette manufacturers. The largest state monopoly is China National Tobacco Corporation, with a global cigarette market share that exceeds that of any private company. Because the European Union intends to restrict further mergers and acquisitions that increase a tobacco company’s market-share dominance, industry consolidation trends may have peaked.

The tobacco industry includes some of the most powerful transnational corporate entities in the world. Tobacco conglomerates have diversified into many other industries, such as financial services, food and beverages, pharmaceuticals, real estate, hotels, restaurants, communications, and apparel, among others. The tobacco industry is expected to continue increasing in size and power.

The global tobacco market, valued at $378 billion, grew by 4.6 percent in 2007. By the year 2012, the value of the global tobacco market is projected to increase another 23 percent, reaching $464.4 billion. If Big Tobacco were a country, it would have the 23rd-largest gross domestic product in the world, surpassing the GDP of countries like Norway and Saudi Arabia. (via Tobacco Atlas Online – Tobacco Companies.).

India’s small production base is a combination of two aspects. Indian social inertia against addictive substances and the Government on the other. Indian cigarette business, small as it is, was put in Indian hands during Indira Gandhi’s socialist days. BAT lost control of ITC, which was placed in the hands of professional Indian managers.

Cigarette production in major markets (Graphics by timesofindia.com.). Click for larger image.

Cigarette production in major markets (Graphics by timesofindia.com.). Click for larger image.

Chinese State Tobacco monopoly

The complicity of governments is very similar to the modern expansion in prostitution – especially in the West.

Or Western powers pushing opium in China in the nineteenth century. After the opium experience of the Chinese, when Western trading houses, under State protection, using the garb of ‘free trade’, made China into the largest consumer of opium.

The Chinese Govt. has replaced opium with tobacco.

The second secret of the tobacco business is to be dominant in purchasing and cornering tobacco stock. For cornering tobacco stocks, Big Tobacco depends on Central Banks’ support – aka State support. For instance, ITC (and other major global tobacco purchasers) in India has a major presence in Guntur, where Indian tobacco trade is headquartered.

ITC’s over-sized chequebook buys it market dominance.

The Indian tobacco profile

India is the third largest producer of tobacco – after China and USA. India ranks 6th as a tobacco exporting nation, as most of tobacco in India is consumed by domestic consumers. Tobacco consumption in India follows traditional patterns, as a non-industrial product – spanning chewing tobacco, bidis (tobacco rolled in leaves), hookah, clay pipes and snuff. Indian traditional tobacco usage consumes between 75%-85% of total tobacco cultivation.

Indian tobacco consumption and control follows consumption patterns of psychotropic drugs. All the major drugs in the world came of India – opium is afeem, khuskhus पोस्त; cannabis is charas, ganja, marijuana, hashish. Heroin is a derivative of opium. Even, as Indians are significant (legal) producers, they are not high on consumption lists.

However, drugs never became a big problem in India. Unlike in China, or in Medieval Middle East (when drug crazed criminals called hashishis became assassins). All these drugs were introduced to the world by India – with records going back to 1000 BC. Similarly family and peer pressure plays an important role in controlling the less dangerous form of traditional tobacco usage in India. In modern times, Indian gold smuggling was funded by carriage and export of drugs.

Cigarette production consumes less than one-fourth of India’s tobacco production.

Until two years ago, non-filter cigarettes comprised 30% of the total cigarette consumption. But with an increase in excise duty on non-filter cigarettes from Rs 168 to Rs 819 per thousand from March 1, 2008, the demand for low-priced filter cigarettes has risen At present, the excise duty on a pack of 10 filter cigarettes is Rs 8.19, and VAT Rs 1.05. Thus, taxes total Rs 10 per pack. Illicit cigarettes are sold for less than this amount, leading the government to believe that either registered cigarette units are evading duty or foreign-made cigarettes are flooding the market from Myanmar and the UK The business of low-cost cigarettes is big in the country, especially in Delhi, Uttar Pradesh, Madhya Pradesh, Rajasthan and Punjab. (via Article Window).

The expansion of manufacturing in cigarettes globally (see chart) is much like the housing scam in US and Europe. Banks made huge advances, created a bubble, and are now busy foreclosing these loans. The modern myth of Republic Democracy at work.

How maya works in real life.

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