The Mix Nixed

What will happen to gutkha manufacturers as state after state bans all forms of chewing tobacco?
Gaurakh Nath turns back to speak to us, unconcerned that he’s negotiating an autorickshaw through one of Delhi’s overcrowded roads. His jaws are working away at chewing and talking, and saliva dribbles from the side of his mouth as he rather incoherently explains why he’s not worried about the ban on gutkha in Delhi. He’s been getting through four or five pouches of pan masala and gutkha in a day for 15 years, and is determined his habit will continue, even though the Delhi government banned the sale, manufacture, display and storage of all gutkha products in September 2012. “I can always find some supply though I may have to pay more than the actual price,” he says.
Certainly, the ban on gutkha and other forms of chewing tobacco has been tougher to implement than the state governments anticipated. And this despite 18 states having imposed blanket bans since April 2012 (two of them, Odisha and Uttarakhand, kicked off 2013 with the ban). Despite its image as a cottage industry, gutkha is estimated as a Rs 15,000-20,000 crore business. The Smokeless Tobacco Association, which represents the gutkha and pan masala industry, claims some 40 million people will be directly and indirectly affected by the ban. That includes stakeholders across the packaging and commodities (arecanut, cardamom, etc.) sides to the business, and panwallahs, distributors and stockists, apart from those directly employed by gutkha makers.
Those are big numbers and the pain isn’t likely to lessen any time soon — the ban in Uttar Pradesh will start from April 1; other states such as Tamil Nadu and Assam are mulling over similar strictures; Maharashtra and Odisha have, meanwhile, extended the ban to cover even pan masala.

Why the ban?
In 2011, the Food Safety and Standards Authority of India (FSSAI), a government watchdog, laid the foundations for the ban with a new rule: tobacco and nicotine cannot be used as ingredients in any food product. Based on the suggestion of a national consultation report, this rule was notified under the Food Safety and Standards Act, 2006, and it defines ‘food’ as anything that is partially processed and can be ingested by human beings. SN Mohanty, CEO, FSSAI, justifies: “Regulations include tobacco in the items sold as food because gutkha is partially ingested.” States can impose annually renewable bans under the regulations.
Why is gutkha such a big deal? GATS (the Global Adult Tobacco Survey) says 75% of Indian tobacco consumers (260 million of them) use non-smoking tobacco products such as gutkha, far outnumbering the more visible smokers. There is, of course, a significant and confusing vocabulary of similar products: pan masala is gutkha minus the tobacco; zarda and khaini pack in up to 90% tobacco (sun-dried, with lime); snuff is simply powdered tobacco sniffed up the nostril.

Gutkha is a Rs 15,000-20,000 crore industry. 40 million people will be affected by the ban, says the industry body

Gutkha, hugely popular as a mouth freshener and stimulant in the Indian subcontinent, is a dry concoction of crushed arecanut (supari), 7-8% tobacco, catechu (a dry, brown extract from the acacia tree), paraffin, slaked lime, and sweet or savoury flavourings, but that’s not the least of it — gutkha is also said to contain 3,095 chemicals, including 28 carcinogenic substances. An Edelweiss sector update says India has the highest global prevalence of oral cancer and 75,000-80,000 new cases are reported every year. Tobacco-related illnesses eat up approximately Rs 30,000 crore in both public and private health services — that’s a full fourth of the country’s entire health spending. Oddly enough, the government hasn’t directly cited public health reasons for the gutkha ban. The industry’s response to the ban is equally mixed up and, er, murky. Fight or flee
The gutkha industry is highly fragmented. Dozens of regional players (like Shikhar and Dilbagh in Delhi) dominate the Rs 1-2 per sachet segment. The national market has only a few big names like Manikchand (the MD or RMD brand) and Pan Parag’s gutkha variant, which are strong in the Rs 7-10 per sachet segment. Kanpur and Delhi in the north, and Ahmedabad, Vadodra, Goa and Pune in the west, are major manufacturing clusters.
Quite in line with the fragmented nature of the industry, it was a contradictory chorus that arose when the ban took effect — some say it will be the death knell, others are blasé and hold the view that this ban, like the other attempts before it, won’t change anything. “50% of the industry and its markets have already vanished with ban in 14 states,” despairs Sanjay Dechan, executive director of the Smokeless Tobacco Association (STA). “After April 1, 80% will have vanished.” Notably, that’s when UP joins the ban.

“The entire banning exercise is aimed at gifting one company the entire market"Sanjay Dechan, Executive director, Smokeless Tobacco Federation

The makers of the Delhi-based Dilbagh, a local brand, are also pessimistic. “It is pointless to talk to media and state our position,” says Satyam Bihani, director, Som Fragrances, owner of the brand that comes in third, after Manikchand and DS. “The government doesn’t hear. Nothing will change.” Already, the pain is obvious. Pan Bahar’s Sharad Jain admits, “I have laid off 20-30 workers after the ban.” Still others are literally fleeing. Partners of Trimurti Fragrances’ Shikhar gutkha have relocated to Mumbai from Delhi. Sarvesh Aggarwal, who was still listed as a board member in the Shikhar Group’s website at the time of writing, is cagey about their future plans, “We have already shifted to Mumbai for good and we will be trying something else here.” Not everybody has taken such drastic steps, or not yet anyway. Delhi-based units have moved their facilities to Noida and Kanpur. But that reprieve will last only for a couple of months more.
Ankur Kumar, proprietor of the Delhi-based Sara Tobacco, who claims to have advised several tobacco entrepreneurs in setting up their businesses, does not believe this is a do-or-die situation. “Gutkha makers have amassed untold wealth over decades — many of them own malls and other businesses already. It [the ban] should not be a survival issue for them.”
Then there’s Dharampal Satyapal (DS) Group, the biggest player with its Rajnigandha brand, which is challenging the government in various courts. Despite repeated requests, the company declined to comment for this story but local vendors point out its ingenious way of ensuring sales continue. The DS Group sells Rajnigandha Pan Masala paired with sachets of Tulsi Tobacco — pop both into the mouth and, voila, there’s ‘legal’ gutkha. Of course, it’s not the only company offering this completely legal way of circumventing the ban — many other former gutkha brands are now available as two separate pouches of pan masala and chewing tobacco.
New Avenues
Interestingly, many big names in gutkha, like Pan Bahar, originated in Kanpur before moving to Delhi. Such mobility is possible because gutkha manufacturing is a simple process — all it needs is 8-10 small machines and 15-20 workers. HK Paliwal, who does packaging for gutkha makers in Kanpur, nods at the re-reversal, “Yes, many Delhi-based makers have either activated their old set-up here, or are using other people’s platform to produce gutkha.” Paliwal, though, is already casting about for other business. “The same machines can be used for packaging small biscuits and daal-bhujiya packets,” says the canny businessman.
Meanwhile, fragrance makers, like the Kanpur-based Bluebell Fragrances’ owner Jatin Gupta, are also worried. More than 250 fragrance makers like him from Kanpur and Kannauj (a small town 80 km away) will lose 90% of their market from April. Gupta laments, “Everybody is considering supplying soap and agarbatti fragrances but it won’t be as big as gutkha for us.”

“Why has zarda been spared and gutkha banned when zarda is far more hazardous with almost 90% tobacco?"Bhiku Patel, President, Tobacco Merchants Association

Meanwhile, the mere mention of cigarettes causes heartburn to gutkha makers, whose lobby issued big advertisements in dailies, calling the ban unjustified, pointing out that cigarettes contain more tobacco than gutkha. “The entire banning exercise is aimed at gifting one company the entire market,” lashes out Dechan, referring to ITC, which controls 85% of the cigarettes industry in India. The gutkha lobby cites the rise in ITC’s stock prices over the past six months and analyst reports on the company recommend that investors buy the stock. But is this a perfect zero-sum game as the lobby makes it out to be? No, say analysts. “The low-end cigarette brands might benefit but it doesn’t start immediately,” says Abneesh Rai, analyst, Edelweiss Securities. “ITC’s growth has been flattish in the last two quarters. Cigarettes will gain slightly after some years.” He feels there is still a big price gap between gutkha and cigarettes, and also that cigarettes are a far more visible and taboo product. “Women and children who eat ‘gutkha’ may not switch to cigarettes,” says Rai.
Dechan does not hesitate to blame officials in the health ministry and the FSSAI, who he says serve the cigarette lobby’s interests. “They keep sending advisories to state governments on banning gutkha, and threaten them by denying funds under the NHRM [the National Rural Health Mission, a central scheme implemented by the states] if they fail to implement the ban,” says a frustrated Dechan.

In Ahmedabad, Bhikubhai Patel has a different question. “Why has zarda been spared and gutkha banned when zarda is far more hazardous with almost 90% tobacco?” asks the president of the Gujarat Tobacco Merchants Association. Patel feels Gujarat farmers, who supply approximately 90% of the tobacco used in products like gutkha, khaini and zarda, won’t take such a big hit now because gutkha is only a small part of the tobacco market. But far-sighted farmers in Anand, Baroda and Khera aren’t taking any changes — they are already shifting to alternative crops like banana.
Meanwhile, gutkha makers seem to be counting on the separate sachets strategy to work. “If some one has a sweet tooth, he has it for life,” says an official from a big gutkha brand, who does not wish to be named. Anand Bathija, proprietor of Trident Exports, makers of the Kuber brand of gutkha and khaini, is not so sure: “Erstwhile gutkha makers will have to work really hard to make this mix-two-sachets route works as handsomely as single-sachet gutkha.”
How’s the ban working? Says Sunil Singh, state nodal officer of the National Tobacco Control Programme in Rajasthan, “So far, we have conducted inspections at 31,000 places after the ban and destroyed 8 million gutkha sachets. Trucks that were smuggling in the product have been seized. We have also started a toll-free helpline for people who want to quit the tobacco habit.”
Other states offer similar positive news. Says Ashish Singhmar, deputy commissioner of Hamirpur district in Himachal Pradesh, “Open sale has been checked since the ban. The police and food and health safety departments have been checking and conducting raids regularly.”
But dig deeper and check with petty officials across most states, and a different picture emerges. The police in all states is already overburdened and elections are around the corner — nabbing gutkha sellers and stopping manufacture is hardly a priority.
STA’s Dechan feels the ban will drive the gutkha industry underground. He is already almost right. Bhini Prasad, owner of a cramped corner store in Karol Bagh, does not display the gutkha he sells, but fishes it out surreptitiously from a rack hidden away inside. “It comes from UP,” he says sotto voce. “We sell to our special customers at a Rs 2 premium.”