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by Manjari Peiris

Much has been spoken and written on white cigarette or illicit cigarette manufacturing and its availability island-wide. The foremost topic of the licit cigarette manufacturers in the recent past has been to highlight it as the biggest threat that they are faced with in marketing their products.

The Ceylon Tobacco Company claims that when the tax on legal cigarettes is high there are more tendencies for increased availability and consumption of white cigarettes, which are available at a cheaper price. Also the Ceylon Tobacco Company points out that the government loses the revenue due to them in the form of tax from the white cigarette industry. Their argument is that the white cigarette manufacturers are not registered as cigarette manufacturers; hence they do not pay the duties that are leviable on the products. The CTC very often request the government to reduce excise duty on legal cigarettes so that the prices on cigarettes could be lowered and thereby prevent increased availability and use of white cigarettes. But, is there a reasonable logic behind this suggestion?

When inquired from the white cigarette manufacturers co-operative society sources in this regard, they claim that the white cigarette industry dates back 20 years and the scale of production has widened the last 2-3 years. A spokesman for the white cigarette manufactures association revealed that tobacco for white cigarette manufacturing had been supplied by the CTC. In the beginning they had looked after the white cigarette manufacturing business. Four years ago they had stopped helping the business. The white cigarette manufacturers say that there are bills to prove that the CTC provided them with the raw material for the manufacturing.

According to the white cigarette manufacturers they now purchase tobacco from Galewela tobacco farmers.

When the tobacco farmers at Galewela were contacted they said that the barn manager of the CTC provides them with the plants, fertilizer and other requirements for cultivation. They said that the harvest is returned to the barn manager. The tobacco farmers are selling the residue of tobacco cultivation to private buyers such as white cigarette manufacturers with the knowledge of the CTC barn manager. According to these farmers it is evident that the barn manager of the CTC is in a position to stop private buyers from purchasing the residue and manufacturing white cigarettes. They may either destroy them or stop outsiders purchasing them. This means that the CTC is in a position to stop white cigarette manufacturers buying tobacco from their farmers and also manufacturing white cigarettes.

Without taking the optimum precautions that they could take why do they make various other suggestions?

At present the white cigarette manufacturers pay a tax on sales, which is about 5%. The papers for wrapping are imported from Calcutta. There are traders who do white cigarette business at mass scale production and others who are doing it on a domestic level.

The white cigarette manufacturers say that the white cigarette manufacturing is not a threat to the legal production. But it is a threat to the black beedi manufacturers whose industry is now being wiped away. There are 51 white cigarette manufacturers who are registered under the white cigarette manufacturers cooperative. Generally a person is paid about Rs. 250/- per day for his/her contribution.

The white cigarette manufacturers mentioned that the Janasaviya programme helped financially to start the business. About 6 million white cigarettes are manufactured per month in Sri Lanka. But to add to that there are white cigarette manufacturers who are not registered with the white cigarette manufacturers society.

Today the black beedi industry has about 4000 people involved in their manufacturing process. They allege the white cigarette manufacturers for paving the way for most of their employees to shift from their industry to white cigarette manufacturing. According to them black beedi sales for a week are about 3000 sticks.

The black beedi is popular among farmers. It can be kept without getting spoilt as is not the case with white cigarettes. According to white cigarette manufacturers those who are trading black beedis are eager to wipe out white cigarettes from the market.

A spokesman for the white cigarette industry told that it is the CTC and black beedi manufacturers who try to hammer the white cigarette manufacturers. The white cigarette manufacturers say that the black beedi is more harmful to health.

As you analyze the data collected from the aforesaid survey carried out by interviewing white cigarette manufacturers and the tobacco farmers several queries emerge in one's mind. Why is the tobacco company worried over the government losing its revenue out of tax on cigarettes, if it is not a loss to the company? The money earned out of legal cigarettes does not remain in this country, but is taken away into their mother country (according to the CTC annual report 94.3% of its shares are owned by the British American Tobacco Company).

Why is this company spending huge amount of money to organize media briefings on this issue highlighting that the government loses tax on cigarettes? If white cigarette manufacturers are a threat to the CTC why did they help them to initiate such an industry? Unofficially it is revealed that the CTC bore all the expenses at the first meeting held by the white cigarette manufacturers at a luxurious hotel many years ago.

Why were they involved in it? At a time where the entire tobacco industry in the world is striving hard to evade paying tobacco taxes how far could it be genuine the "ache" that they have on the issues of government losing revenue out of tobacco taxes?

There is enough evidence that the tobacco industry throughout the world is involved in tobacco smuggling, i.e. one third of its total production is sold in the form of smuggled goods in order to avoid tax on tobacco (by dispatching them out of its scheduled destination.) (This has been proved in the world.) In Sri Lanka there has been two such incidents shown on TV. The stock of cigarettes, which was claimed as smuggled cigarettes, had their outer covers printed in Sinhala. However, nothing was proved.

What is now revealed out of the CTC quarterly report is that the government derived a loss of 40 million during the first quarter of this year due to decrease of tax on legal cigarettes.

How many people had shifted from white cigarettes to legal products due to tax reductions? If the CTC is so worried about the government losing revenue they must be extremely concerned over the government losing 40 million out of tax reduction on legal products within a quarter of a year? The best solution to this problem would be to levy high tax on both the industries for two reasons; If the government charges tax on white cigarettes the government's revenue would go up and the money earned by white cigarette manufacturers would remain in the country. If anybody would raise the issue that the quality of white cigarettes is inferior or unhygienic and that they should not be allowed to be legal by taxing them, are legal cigarettes favourable to people's health? (According to the internal documents of the tobacco company it was revealed at an American court case that the tobacco industry itself knows that the death of 50% of its customers are directly caused by smoking.

Therefore, the only solution to this problem would be to levy tax on both these manufacturers something developed countries already do.

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Copyright 2001 The Associated Newspapers of Ceylon Ltd.
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