In India, tobacco is harvested mainly in two forms—cigarette tobacco and non-cigarette tobacco. During 2017-2018, non-cigarette tobacco alone had a ~69% market share. Considering the consumption-tax revenue ratio of the overall segment of smoked tobacco, legal cigarettes account for ~10% of consumption and ~86% of tax revenues. This implies that even though smokeless tobacco has the highest rate of consumption, more revenue is earned from legal cigarettes.
Based on consumption, khaini constituted ~11%, and beedi and cigarette had a market share of ~8%. Usage of smoking mediums like hookah, hookli, chhutta, dhumti and chillum, along with edible tobacco like mawa, snuff, gutka, and pan masala have led to the growth of this market.

Market drivers:
• Over the years, tobacco has become an essential part of the Indian socio-cultural environment, especially in the eastern, northern, and north-eastern parts of the country. A relatively higher income growth compensates for the increasing price of cigarettes, leading to greater consumption. Moreover, societal influences such as peer pressure also aids in driving the demand for tobacco products. These are the crucial factors propelling market growth.

• With the assistance of the Tobacco Board, Indian tobacco producers are using technologically advanced threshing plants and re-drying factories. These facilities are used for increasing the yield of Flue-Cured Virginia (FCV) tobacco, which can then be exported to different countries, across the world. Hence, improved infrastructure drives growth for this market.

Market challenges:

• Cigarette taxes (64% excise duty, 28% GST, and 5% cess) in India are among the highest in the world. Therefore, high tax rates make cigarettes unaffordable to a large section of consumers. As a result, they shift towards the consumption of beedi and other forms of smokeless tobacco. Hence, the overall tobacco market experiences slow growth.

• The Cigarettes and Other Tobacco Products (Prohibition of Advertisement and Regulation of Trade and Commerce, Production, Supply and Distribution) Act of 2003 (COTPA, 2003) imposes a blanket ban on tobacco advertising. This prevents companies from directly advertising their products, because of which they resort to surrogate advertising. Hence, it becomes difficult for manufacturers to promote their brands, limiting the growth of the domestic market.

Companies covered:
1. Ashok and Company Pan Bahar Ltd.
2. Godfrey Phillips India Ltd.
3. Golden Tobacco Company Ltd.
4. ITC Ltd.
5. Kothari Products Ltd.
6. M.R. Tobacco Pvt. Ltd.
7. National Tobacco Company of India Ltd.
8. Pataka Industries Pvt. Ltd.
9. Sinnar Bidi Udyog Ltd.
10. VST Industries Ltd.

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