The government announced a ban on e-cigarettes on Wednesday – September 18, citing their harmful effects on the youth. The ordinance issued on Thursday – September 19 bans the import, export, transport, sale, possession, ownership or advertisement of these with harsh fines even for first time defaulters.
Some noteworthy point about the recent ordinance and e-cigarette markets in India are listed here:
The ban was enforced keeping in mind the issues and concerns raised by the Health Ministry of India. An ordinance, which is usually issued in emergency situations or when the parliament is not in session, has been criticized by many as a decision made in haste. There are many more opposition voices arguing as to why no ban has been imposed on cigarettes which is a source that has been scientifically proven to be more harmful than e-cigarettes.
The Global Furor
The e-cigarettes have been under scrutiny globally. However, some scientists have put forward compelling evidences showing vaping to be less harmful for the lungs, than what cigarettes generally cause. This is mainly because of the absence of tobacco in e-cigarettes which is known to cause cancer. The presence of nicotine in e-cigarettes makes them more addictive but less life threatening. In fact, many smokers have claimed that e-cigarettes have helped them to quit smoking. This has also been the USP of e-Cigarette companies in India.
The government and state-owned companies have a 28% stake in ITC, which is one of the key players in the cigarette industry. The government’s New India Assurance Company also has a stake of 1.53% in VST Industries (another major cigarette manufacturing company of India). The concern showcased by the government regarding the health of youngsters, while banning the e-cigarettes contradicts its own position, being a shareholder in the leading cigarette manufacturing company.
Companies That Make Merry
Stocks of cigarette companies such as ITC and VST saw price hikes on Wednesday in light of this announcement. The value of government’s stake too surged by as much as Rs. 1800 crore following the announcement. The cigarette company stocks are expected to see volatility in the coming few days as a result of this move by the government.
The data that forms the basis of the decision to introduce the ordinance to ban e-cigarettes was primarily US consumption based. The e-cigarette markets in India are not regulated and are still untapped. However, the estimated Indian market size is at INR 200 - 300 crores and has been growing rapidly.
While the move in itself was quite significant for the cigarette industry, the fury over it was quickly drowned in the merry which was witnessed as a result of the FM’s announcement barely two days after this ordinance was passed. However, the cigarette makers in India are surely profiting from the moves, namely, the passing of the ordinance as well as the finance minister’s announcements related to cutting corporate taxes. Active traders can easily reap benefits from such movement either through individual research and analysis or by taking help from a certified investment advisor.