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Sunday, 31 March 2013

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Tax on smoking substitutes soon

Beedi, cigars and pipe tobacco under scrutiny:



Beedi being rolled

With the constant rise on the levies imposed on tobacco and cigarettes by the government resulting billions of rupees in revenue, measures are now being taken by the authorities to revive the laws related to the taxation of all the other smoking substitutes.

Apart from cigarettes other smoking substitutes like beedi, cigars and pipe tobacco had been commonly used in Sri Lanka for generations but the latter was never taxed appropriately. The government, along with the Department of Excise is now working on a system to introduce a levy on these products and especially on beedi, which is expected to come into effect by end April.

Presently the Government earns over Rs.30 billion annually from taxes imposed on cigarettes which is about 8 percent of the entire state revenue. Before the Tobacco Tax Act, No 08 of 1999 was implemented, a kilogram of tobacco used for cigarettes was taxed at Rs. 1,365.50. Because of this the tobacco companies earned huge profits unlike today.

The criteria of taxing a kilogram of tobacco was later amended and a tax was imposed on each stick of cigarette. This gained a huge revenue to the government whereas 1,200 sticks of cigarettes could approximately be produced from a kilogram of tobacco. Currently a levy of Rs.19 and some cents is imposed on a stick of cigarette whilst a production cost of four rupees and some cents is borne by the Ceylon Tobacco Company (CTC). CTC which is a part of the British American Tobacco company is the only cigarette manufacturer which survived with a monopoly whereas previous competitors like Delight and Star Cigarettes vanished in the course of time.

In the meantime, surveys carried out by the Excise Department have revealed that 30 percent of the smokers in the country are beedi smokers. With the introduction of the Presidential campaign to control tobacco and alcohol in 2005 new directives were made to identify the other varieties of smoking substitutes like beedi, cigars and pipe tobacco. Since there was no specific tax on these items before a new law was gazetted in 2009 ordering all the importers, manufacturers and stock keepers of tobacco used for beedis to register with the Excise Department. The gazette numbered 1625/1 dated October 26, 2009 brought those orders to be put into effect only after March 1, 2010.

A grace period of five months was granted by the gazette for the traders to register and obtain a license for their business prior to the raids by the Excise Department to detect those who do not abide by the new laws.

Superintendent of Excise, Colombo City 1 Range Prabath Jayawickrama told the Sunday Observer that according to the latest statistics about 800 traders have registered and obtained a licence to manufacture, import and store beedi and beedi tobacco throughout the country. Out of that the majority is identified from the areas of Galewela, Badulla and Hanguranketha where beedi production is famous for. Tobacco is grown by regular paddy and vegetable farmers during the dry season who would sell the chief portion of their harvest to CTC for the manufacturing of cigarettes and retain the rest for the production of beedi.

Since beedi manufacturing is a growing trade the government has introduced new guidelines to the traders to practice to maintain the standards of the production. Before issuing a license, the traders have to convince the authorities whether they have proper infrastructure and suitable work environment for the production. These guidelines will come into light prior to the imminent new tax being imposed on beedi. As a result the current price of a stick of beedi which is Rs. 2.00, is expected to rise.

Beedi which is a domestic product is a trade that requires a considerable amount of manpower. The specially selected tobacco has to be manually rolled into sticks using tendu leaves which is imported from India by traders in Colombo.

The name Beedi which derives from Hindi language was a low priced smoking substitute originated in India. It became a popular product in Sri Lanka many decades ago. In fact, the supply of beedi to the migrated Indian estate workers had been discussed at Sirima - Shasthri agreement.

Jayawickrama said that the Government's intention of introducing new laws and a levy on beedi is also to control the consumption of the product, discourage smoking and to end the dope menace according to the Mathata Thitha program. He said laws and regulations and taxes as well as controlling bodies like NATA is essential to create a policy on this matter.


The National Authority on Tobacco and Alcohol was established in 2006 to implement the Tobacco Control Act which was enacted after adopting World Health Organisation's Framework Convention on Tobacco Control (WHO FCTC). The FCTC is the world's first global public health treaty which entered into force in 2005 after signed by 168 countries out of 192 WHO member states.

Sri Lanka was the first to adopt the treaty in the South-East Asian region. The FCTC is globally committed in combating the tobacco epidemic which sets out certain steps for the governments to follow when addressing the tobacco control issue.

The guidelines include adopting tax and price measures to minimise tobacco consumption, ban tobacco advertising, promotion and sponsorship, create smoke-free work and public spaces, put prominent health warnings on tobacco packages and combat illicit trade in tobacco products. A spokesman of NATA told the Sunday Observer that NATA - Bloomberg Project was funded for two consecutive cycles from 2009 to 2010 and 2011 to 2012 by the Bloomberg Initiative to control the use of tobacco related products in Sri Lanka. The project has however ceased to continue since the end of February as Sri Lanka was no longer identified as a high burden country for smoking and tobacco consumption. Compared to other high burden countries in the region like India, China, Indonesia and Vietnam, Sri Lanka has performed well in fighting the tobacco menace during the past few years.

This had proved comparatively with a lesser number of smokers and number of lung cancer cases reported, the spokesman said.

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