ITC subsidiary faces double whammy in Nepal

August 21st, 2011 - 2:47 pm ICT by IANS  

Kathmandu, Aug 21 (IANS) After being forced to shut down its state-of-the-art garments factory built in eastern Nepal due to workers’ militancy and vandalism, ITC’s subsidiary in Nepal now faces a second blow in the form of the newly introduced smoking ban.

“The government is trying to kill the goose that lays the golden egg,” said Sanjiv Keshava, managing director of Surya Nepal, Nepal’s biggest tax-paying company in which Indian tobacco major ITC holds 59 percent share.

“The new Tobacco (Control and Regulatory) Act will cause smuggling of cigarettes from neighbouring countries to shoot up, creating a health and revenue loss hazard the government will not be able to control.”

From Aug 7, Nepal introduced the new act to crack down on the consumption of tobacco, banning smoking in airports, hotels, restaurants, government offices and other public places.

The act also makes it obligatory for tobacco product manufacturers to ensure that product packs carry graphic warnings about the adverse effects of smoking and the harmful ingredients the products contain. The warnings should cover at least 75 percent of the total pack area.

While health activists are hailing the new act, Surya Nepal, that produces about 70 percent of the cigarettes consumed in Nepal, says it is impractical.

“Nepal doesn’t possess a single laboratory which can certify which ingredients are harmful,” says Keshava. “Then how are cigarette manufacturers going to get their list of harmful ingredients?”

Also, he says that it is not mandatory in Nepal’s neighbouring countries - China, India, Bangladesh and Pakistan - to carry such huge graphic warnings.

“In these countries, the tobacco health warnings cover 30-40 percent of the packs,” he says. “So if the cigarettes made in Nepal carry 75 percent warnings, there will be rampant smuggling of cigarettes from these countries.”

Surya Nepal, that has a paid-up capital of NRS 2 billion and paid a revenue of NRS 7 billion in the last fiscal, is now set to start a new tobacco factory in Tanahun. With an investment of NRS 1,000-1,500 million, the new tobacco factory is expected to be operational from 2013.

Nepal’s tobacco manufacturers, who include a Nepali MP from the ruling communist party, also say that the ban will affect the legitimate business of cigarettes without being able to touch the actual culprits.

Nearly 70 percent of tobacco is consumed in Nepal, especially in the villages, in the form of gutka, zarda and other chewable products. These are either smuggled in from India or manufactured clandestinely in Nepal without any quality control or health warnings.

Cigarette manufacturers also say the government has lost track of priorities: peace, security, infrastructure, education, sanitation, drinking water and providing basic healthcare facilities.

They also allege that the “impractical” act was the result of lobbying by NGOs.

The anti-tobacco lobby, buoyed by its success with the tobacco control act, is now calling to make Nepal tobacco free by 2020.

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