Tobacco-related illnesses kill 1.35 million people in India every year. The country has about 276 million tobacco users, and illicit trade makes it harder to control tobacco use. India requires health warning labels to cover more than 15% of tobacco packaging, but people still consume tobacco products heavily. These health issues cost the economy Rs 1773.4 crore annually.

India scores 65 points on the tobacco control scale and ranks highest for its large pictorial health warning labels. The country’s legitimate cigarette market brings in US$14.0 billion in revenue for 2025. Experts predict this will grow 4.22% yearly until 2030. But high taxes and strict rules push some people to buy unregulated products. Law enforcement agencies don’t deal very well with stopping illegal trade. This creates problems for regulators and companies that want to curb illicit trade across the country.

The Indian Government Enforces Stricter Tobacco Control Measures

The Indian Ministry of Health and Family Welfare keeps making tobacco laws stronger through the most important changes to existing tobacco regulations. The country’s battle against tobacco use continues through policy reforms that want to reduce consumption and control illegal distribution networks.

New COTPA Amendments: New Rules for packaging Health Warning Labels

The Ministry of Health and Family Welfare brought new Cigarettes and Other Tobacco Products (Packaging and Labeling) Amendment Rules on December 3, 2024. These rules will start from June 1, 2025. These changes improve existing tobacco control measures under the Cigarettes and Other Tobacco Products Act (COTPA), 2003.

The 2024 amendment brings stronger health warnings labels to deliver clear messages about tobacco risks. Tobacco products must now show “TOBACCO CAUSES PAINFUL DEATH” in white font on red background. They must also display: “QUIT TODAY CALL 1800-11-2356”. The amendment requires two new pictorial health warnings on tobacco packaging in phases.

Karnataka has taken bold steps by tightening COTPA rules in May 2024. The state increased the maximum fine from ₹200 to ₹1,000 and raised the legal buying age from 18 to 20 years. Karnataka now enforces:

• A ban on loose cigarettes or single sticks
• No tobacco sales within 100 meters of educational institutions
• A complete ban on hookah bars whatever their location

The digital world has new regulations too. The draft COTPA Amendment Rules 2024 brought mandatory tobacco health warnings on over-the-top (OTT) media services. These platforms must show anti-tobacco health spots, static messages during tobacco product display, and audio-visual disclaimers when opening the platform.

How WHO FCTC compliance drives policy overhaul

India’s tobacco control framework comes from its early dedication to the World Health Organization Framework Convention on Tobacco Control (WHO FCTC). India became the eighth country to ratify the treaty in 2004. The WHO FCTC was adopted on May 21, 2003, and started on February 27, 2005. It has become one of the fastest accepted treaties in United Nations history.

The FCTC recognized graphic health warning labels as economical solutions to inform consumers about health risks. India implemented some of the world’s strictest labeling requirements. The rules need 85% of the main display area on both sides to show specified warnings.

This policy earned India a perfect score of 10 on the Tobacco Control Scale for pictorial health warning labels. European countries scored nowhere near as high, with most getting 9.

India’s compliance with WHO FCTC covers many strategies:

• Price and tax measures to reduce tobacco demand
• Protection from secondhand smoke exposure
• Tobacco product content regulation
• Public education campaigns
• Limits on tobacco advertising
• Support for quitting tobacco

India hosted the Seventh Session of the Conference of Parties (COP7) in 2016. The country also takes part in the Protocol to Eliminate Illicit Trade in Tobacco Products. These actions show India’s steadfast dedication to global tobacco control efforts.

Operational Challenges for India’s Tobacco Giants and the Supply Chain

Tobacco companies in India face unprecedented changes as the government tightens its grip on packaging rules and distribution controls. These tough measures push companies to revamp their long-standing business practices. They must also deal with a rising threat from illicit tobacco trade.

How Manufacturers Are Adapting to Plain Packaging Mandates

Big tobacco companies need to completely redesign their packaging after India decided to think about plain packaging laws. Australia pioneered this approach in 2012. The law removes all logos, colors, brand images, and promotional details from tobacco packages. Packages now show only basic information like brand name, product name, and manufacturer’s name in black-and-white or contrasting colors.

Australian research shows plain packages make smoking less appealing and help reduce tobacco use. The daily smoking rate among Australians 14 years and older dropped from 15.1% to 12.8% between 2010 and 2013. France, the United Kingdom, and Ireland now have similar laws, and more countries will likely follow suit.

Indian manufacturers must make substantial operational changes to comply with packaging regulations:

• Products must line up with new specifications by set deadlines
• They must follow strict font, color, and resolution rules
• They need to spend more money updating package designs

The tobacco industry actively fights these measures through different channels. The Tobacco Institute of India speaks for major companies like ITC Ltd. and Godfrey Philips. They ran large newspaper ads pointing out that the United States doesn’t require such picture warnings. Industry spokespersons say current text warnings like “Smoking Kills” do enough to discourage smoking.

Distribution Networks Feel the Effects of New Licensing Rules

New licensing rules reshape tobacco distribution channels across the country. These changes especially affect the lives of 45 million farmers in India’s tobacco industry. Many farmers and sellers have hosted protests about sales impacts. However, Chengal Reddy, who leads the Federation of Farmers Association in India, explained they don’t oppose reducing tobacco crops but need alternative crops.

Industry players try to get around regulations with different product strategies. Recent findings show tobacco companies target younger consumers with new tobacco and nicotine products. These include e-cigarettes, heated tobacco products (HTPs), and flavored oral nicotine pouches.

State governments banned these new products using drug laws at first, but struggled with enforcement. The central government later passed complete legislation that banned making, importing, selling, and advertising e-cigarettes, HTPs, and similar products. All the same, people can still buy these products easily both online and in stores because enforcement remains difficult.

Companies also tried to use the nicotine replacement therapy (NRT) licensing process to sell new nicotine products. This led India’s government, backed by civil society groups, to strengthen laws controlling new tobacco and nicotine products. They now watch industry attempts to introduce next-generation products disguised as nicotine replacement therapy (NRTs) more carefully.

The illegal cigarette trade grows in both rural and urban areas. These regulatory challenges create complex operational issues for legitimate companies that work to curb illegal trade while adapting to changing compliance rules.

Illicit Tobacco Trade: The Growing Threat to the Legal Market

Tax arbitrage has created perfect conditions for illegal tobacco products to thrive in India. This hurts government revenue and makes health policies less effective. India now has the world’s fourth-largest illegal cigarette market, with these products making up 26.1% of all cigarettes sold.

Why Tax Policies Drive Consumers to Unregulated Products

Indian smokers pay cigarette taxes that equal 5.71% of the country’s per-capita GDP. These taxes dwarf what other countries charge – they’re 14 times higher than US taxes, 7 times more than Japan’s rates, 6 times above China and Germany’s levels, and 5 times what Russians and Canadians pay. Legal cigarette use in India dropped 28% between 1981/82 and 2023/24. Other tobacco products, including illegal cigarettes, saw a 70% jump during this time.

These sky-high taxes create huge price gaps between legal and illegal cigarettes. Some manufacturers bend industrial rules to sell filter cigarettes at just Rs.2 per stick – a price that’s lower than the tax they should pay. India also sees about 400 billion bidis consumed yearly, with 125 billion of these avoiding taxes. Small bidi makers who produce less than 2 million sticks each year don’t pay taxes. This lets companies create networks of tiny shell firms to dodge tax payments.

Anti–Illicit Trade Efforts Struggle with Enforcement Gaps

India joined the Protocol to Eliminate Illicit Trade in Tobacco Products in 2018, but enforcement remains tough. The country lacks proper systems to track tobacco products. Law enforcement keeps seizing shipments, but many more slip through undetected. Recent seizures paint a clear picture – authorities found 11 lakh illegal cigarettes in Guwahati, 21 lakh in Visakhapatnam, and over 103 lakh in Vijayawada during 2023-2024.

Illicit cigarette trade grows in rural and urban areas

The Federation of All India Farmers’ Associations reports a 17.7% surge in the illegal tobacco market from ₹25,495 crore in 2018-19 to ₹30,012 crore in 2022-23. The government lost an estimated ₹13,331 crore in 2022, up from ₹6,240 crore in 2012.

Different studies show varying figures about market reach. The tobacco industry says illegal cigarette trade. makes up about one-fourth of the market. Independent researchers estimate it’s between 3% and 6%. Law enforcement only catches less than 5% of illegal cigarettes with current methods.

You can easily find illegal cigarettes at markets, paan shops, and hawker stalls across the country. Young people often choose these products because they carry international brand names and cost much less than legal options. These cigarettes usually don’t show required health warnings.

Expanding Cessation Support and Public Health Campaigns

The National Tobacco Control Program (NTCP) has stepped up its efforts to help people quit tobacco. India wants to curb widespread tobacco use by improving support systems and creating awareness. These steps work alongside enforcement actions against illegal tobacco trade by addressing why people use tobacco.

Better Access to Nicotine Replacement Therapy (NRT) and NTQLS Services

The Ministry of Health and Family Welfare started the National Tobacco Quitline Services (NTQLS) with a toll-free number (1800-112-356) in 2016. The service began at Vallabhbhai Patel Chest Institute in Delhi and grew in 2018. New regional centers now offer counseling in local languages at:

• Dr. Bhubaneshwar Borooah Cancer Institute, Guwahati
• National Institute of Mental Health & Neuro Sciences, Bangalore
• Tata Memorial Center, Mumbai

A big change came on September 13, 2022. The government added nicotine replacement therapy (NRT) to the National List of Essential Medicines. This move helps insurance cover NRT costs and aids public sector supply. Medical and dental students now learn about NRT as part of their education. A court ruling has made NRT available in retail stores.

People need these services more than ever. Daily calls jumped to 6,064 after tobacco packaging started showing quitline numbers in 2018. About 38.5% of people who plan to quit succeed in staying tobacco-free.

Changing Minds Through Media

Public health and media campaigns play a vital role in shifting how society views tobacco use. A national TV and radio campaign in 2009 reached 63% of smokeless-only users and 72% of dual users. The campaign made 75% of smokeless-only users worry about their habit.

Research shows better results when people see anti-tobacco messages in multiple places. Men who saw information on two or more media channels tried to quit more often. Programs that target social norms have worked well. They reduced tobacco use (g = 0.233) and positive views about tobacco (g = 0.292).

These campaigns use TV spots, radio shows, ads on public transport, billboards, and wall paintings to reach people of all backgrounds. Public spaces have worked well to influence men in rural areas to quit tobacco.

As illegal cigarette trade grows, these quit-support services help reduce the overall need for tobacco products. This supports broader efforts to fight illegal trade.

The Market Shakeup Reshapes the Investment Landscape

Financial institutions continue to pull back from the tobacco sector. Stricter tobacco regulations and health concerns have altered the investment landscape. These changes have reshaped how tobacco companies operate and get their capital.

Investors Reassess Exposure to Tobacco Services

Regulatory pressures and changing consumer priorities have pushed investors to reevaluate their tobacco sector investments. The global tobacco services industry has 191 companies, with major concentrations in the United States, China, Japan, and India. Service providers make up 84.3% of these companies, which don’t participate in production or distribution. Investors now see tobacco services as high-risk investments because of their susceptibility to packaging and advertising restrictions. Many responsible investors have adopted screening tools to direct their way through regulatory complexities and reduce their exposure to risks.

ESG frameworks like SFDR and USCCB influence capital flows

The responsible investment decisions rest on these key frameworks:

• The Sustainable Finance Disclosure Regulation (SFDR), active since 2019, requires European investors to exclude tobacco-related assets from portfolios subject to EU Climate Transition Benchmark and EU Paris Agreement Benchmark
• United States Conference of Catholic Bishops (USCCB) Investment Guidelines label tobacco as an addictive material and discourage investment
• The WHO Framework Convention on Tobacco Control offers regulatory guidance that shapes investment decisions

These frameworks highlight tobacco’s clash with sustainability principles. Indian government pension funds have invested about 853.8 million USD in ITC Ltd., the country’s major tobacco business. The LIC Pension fund has 25.1% of total tobacco investment. SBI follows with 22.5%, UTI with 22.1%, and HDFC with 20.8%.

Tobacco companies explore diversification strategies

Tobacco giants have stepped up their diversification efforts. ITC Ltd. shows this strategic shift well. The company has expanded into Fast-Moving Consumer Goods (FMCG), Hotels, Agri-Business, and Paperboards & Packaging. ITC started its non-tobacco journey with hotels in the 1970s. Since then, it has built businesses in sportswear, greeting cards, packaged foods, and branded staples.

The results from these diversification efforts tell a mixed story. Non-tobacco businesses add only 15% to ITC Ltd.’s revenue, while cigarettes still bring in 85%. The company faces what analysts call a “conglomerate discount.” Markets value diversified companies at less than the sum of their individual businesses. ITC has recently split off its hotel business to help unlock shareholder value.

Market Shakeup for India’s Tobacco Giants

India faces a defining moment in its fight against tobacco consumption. New regulations, including upcoming COTPA amendments and plain packaging rules, are the most important steps to reduce tobacco-related deaths. The country’s commitment to WHO FCTC compliance shows its dedication to protecting public health despite many challenges in implementation.

Tobacco manufacturers now deal with major operational disruptions. These companies must change their packaging designs, distribution networks, and product strategies as regulations become stricter. The industry tries to bypass these restrictions through alternative products, which shows the ongoing clash between public health goals and business interests.

The continuous growth of illegal tobacco trade remains a major concern. High tax policies, though meant to help, have pushed people toward unregulated products that don’t follow health warnings or quality controls. So both government revenue and public health campaigns take a hit as enforcement agencies don’t deal very well with this growing shadow market.

In spite of that, the National Tobacco Control Program offers hope by expanding its quit-smoking services. The program now includes nicotine replacement therapy in the National List of Essential Medicines and provides better Cessation Support services to support people who want to quit. On top of that, it runs media campaigns that alter people’s views about tobacco use, especially when these messages reach them through multiple channels.

The financial world of tobacco is going through big changes. Investors now think twice about putting money into tobacco services as ESG frameworks affect capital flows. ITC Ltd. and other major companies try to diversify, but traditional tobacco products still bring in most of their money.

India’s tobacco control efforts need a delicate balance between regulations, enforcement, and market realities. We have a long way to go, but we can build on this progress made through pictorial warnings and quit-smoking support. The path forward requires better enforcement and control of illegal trade to protect public health while keeping the economy stable.

Read more: Breaking Down the Global Counterfeit Cigarettes Crisis: Facts and Figures