Friday 28 October 2016

Court ruling on cigarette packs a major blow to $11bn industry

Aditya Kalra

Published 06/05/2016 | 02:30

India's Supreme Court has told tobacco companies they must adhere to a new federal rule requiring much larger health warnings on cigarette packs, in a major setback for the $11bn (€9.6bn) industry that opposes the new policy.

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The rules make India's health warning rules the toughest in the world, along with Thailand's.

The Supreme Court turned down a plea to stay implementation of the new rules introduced from April 1, which require health warnings to cover 85pc of a cigarette pack's surface, up from 20pc earlier.

In a packed court room in New Delhi, a two-judge bench rejected the industry's plea to extend a stay it had obtained from a court in Karnataka but agreed to a request to move the rest of the appeals to the Karnataka court.

"You have duty towards the society," the judges told a team of industry lawyers on Wednesday, which included some of the most expensive advocates in the country. The industry "should not violate any rule prevailing as of today", they said.

The Supreme Court also directed the high court of Karnataka state to hear dozens of pleas filed against the new rules in several Indian courts and decide on the matter within six weeks.

Shares in India's biggest cigarette maker ITC, part-owned by British American Tobacco, pared gains after the court ruling. US-based Philip Morris International's India partner Godfrey Phillips also fell.

ITC, Godfrey and the industry lobby group Tobacco Institute of India did not respond to requests seeking comment.

The Supreme Court's ruling can leave the industry in limbo.

It was not immediately clear whether it will start complying with the new rules or sell old stock while it waits for the Karnataka court to decide. When the rules came into force last month, the industry shut down factories in protest for days.

India's traditional hand-rolled cigarette makers also joined in the protest. The rules were initially supposed to come into force on April 1, but were delayed.

Smoking kills more than a million people a year in India, according to BMJ Global Health. The World Health Organisation says tobacco-related diseases cost India $16bn annually.

The tobacco industry filed 27 cases against the federal rule in several courts around the country, according to lawyers involved in the case.

ITC has said it had obtained at least one judgment that allowed it to resume production with older warnings, and one that allowed it to sell old stock, which it then tried to use to circumvent the federal government's orders.

In a letter, dated April 26, seen by Reuters, ITC cited the two rulings to press a regulator who had seized its cigarette stock worth billions of rupees. Ranjit Kumar, solicitor general of India, told the court that the government was committed to the new rules and opposes any stay on their implementation.

It hasn't been a good week for the tobacco industry globally. The European Union's highest court has also upheld a tough EU law that will standardise cigarette packs, ban menthol flavouring and restrict e-cigarette advertising, paving the way for its adoption this month and dealing a blow to Big Tobacco.

The European Court of Justice's rejection of a legal challenge brought by Philip Morris International and British American Tobacco (BAT) could weigh on profits for the industry. (Reuters)

Irish Independent

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