On April 14, Maharashtra finance minister Ajit Pawar reversed the tax of 7.5% reduction in VAT on bidis and unprocessed tobacco. In the budget, a VAT of 12.5% was levied on bidis, and 20% on tobacco.
The signs were ominous. Since January, tendu traders in Gondia have boycotted the auction of tendu blocks because the forest department had prohibited contractors from setting fire to the forest. The fire is set, as it has been done for the last 50 years, to improve the flush of leaves next season. The government and tendu contractors, it is reported, had reached an ‘understanding’. In order to appease contractors, the government has asked them to submit tenders at a lower price.
Lowered price means tendu pluckers will have lesser bonus and wages. Unless the government decides to compensate pluckers, it may lose the tribal vote in the tendu-plucking districts. The tendu trade, and in effect bidi trade, is dominated by a handful of politicians and one particular ally of the ruling party, Praful Patel of NCP.
Patel has been famously quoted in the Wall Street Journal in September 1999, ‘Though I don’t involve myself in the bidi business, it is doing well with a turnover of Rs 800 crore.’ Bidi manufacturers like Patel say they are performing national service by providing work for the women. ‘If they didn’t do this, what other job could these women do?’ asks Praful Patel, who employs 50,000 women across eight states. In terms of worker comfort, ‘it’s just like knitting,’ he says. ‘It’s a fine-tuned, nice job.’
The modern bidi was invented in the early 1900s and rivalled cigarettes. They became popular with the poor. Bidi centres in Maharashtra collapsed when bidi wages and excise rules were strictly enforced since their inception in 1976. In 1961, there were close to 181 bidi factories in the state, which declined to 94 in 1985. Many bidi merchants deserted these communities and went elsewhere.
The paradox of the bidi roller and its smoker are perpetuated into poverty. Many states have recognised this except Maharashtra. Compared to its neighbours, Maharashtra not only lacks a prudent tobacco tax policy but also an effective tobacco control programme.
Pawar is plain wrong when he says that raising taxes will affect the wages of the bidi roller. The wages are protected by law. If bidi rollers are punished by a hike in tax, it is Pawar’s failure in governance in preventing middlemen from providing the basic wages under law. If workers say taxes will depress their daily wage, then Pawar needs to put in place measures to protect the poor.
As finance minister, it would be his moral obligation to ensure that communities dependent on tendu and bidi, among others, will receive the pittance decided by his government but also to give them a fair chance of having economic choices and dignity.
Taxes are meant to be transferred to retail price of the product. This means the price must be paid by the consumer through the producer and not the workers. Take the case of Rajasthan, which raised VAT from 12.5% to 40% last year. Retail price of Desai 303 brand bidis has risen from Rs8.50 to Rs11 in Rajasthan. Tobacco taxes fund the National Rural Health Mission, National Calamity
Contingency Fund and other initiatives, all of which are taxed with the poor in mind. Bidi cess is aimed to improve the lives of bidi workers and their families. Of course, there is huge evasion in excise and cess collections. In India in 2007, illicit trade of tendu leaves and untaxed bidis together was estimated at Rs1,288 crore, more than the budget for routine immunisation and polio combined or larger than the profits of India’s largest public sector aluminum producer NALCO. The important feature of tobacco tax apart is to make tobacco products unaffordable for the young and the poor.
The government has depressed the price of tendu, and in effect made bidis more affordable for the poor. This means more profits for bidi barons. In sum, Pawar’s support for the bidi industry has sealed the fate of four lakh tendu pluckers and two lakh bidi rollers to many more decades of destitution and abject poverty. This may be bad economics, but good politics.
The writer works on public health and tobacco control at the grassroots level. The views are personal.