India is on the brink of a dramatic shift in tobacco pricing. A draft excise bill proposes to raise the specific duty on cigarettes from Rs 18 per 1,000 sticks to Rs 72, a four‑fold increase that could push the retail price of a pack from the current Rs 80‑120 range to as high as Rs 300‑350. The move, championed by the Ministry of Finance and backed by public‑health advocates, is positioned as a tool to curb smoking prevalence, raise fiscal revenue, and align India with global best practices. Yet the proposal also raises concerns about affordability for low‑income smokers, potential growth of illicit trade, and broader economic implications. This article unpacks the legislative backdrop, the projected price impact, health outcomes, and the political economy surrounding the bill.
Background of the excise proposal
The draft Excise (Amendment) Bill, 2025 revises the specific duty structure for cigarettes, raising it to Rs 72 per 1,000 sticks. The amendment aligns with the World Health Organization’s recommendation to increase tobacco taxes by at least 75% of the retail price. Historically, India’s tobacco tax regime has relied on a mix of ad valorem and specific duties, resulting in a fragmented price landscape. By moving to a higher specific duty, the government aims to simplify compliance, reduce price differentials, and generate an estimated additional revenue of Rs 30,000 crore annually.
Projected price impact on consumers
Analysts have modelled the likely retail price shifts based on current market data. Assuming an average excise‑to‑retail price pass‑through of 85%, the following table illustrates the expected price bands for a standard 20‑stick pack:
| Current price (Rs) | Projected price after bill (Rs) | Price increase (%) |
|---|---|---|
| 80 | 310 | 287 |
| 100 | 380 | 280 |
| 120 | 450 | 275 |
These figures, calculated as of 29 December 2025, suggest a near‑quadrupling of the cost of a pack, potentially pushing many smokers into a higher price bracket and prompting a reassessment of consumption habits.
Public‑health implications
Economic theory and empirical evidence consistently link higher tobacco prices with reduced consumption, especially among youth and low‑income groups. The Ministry of Health projects a 15‑20% decline in smoking prevalence within three years of the tax hike, translating to an estimated 10 million fewer smokers. Moreover, reduced tobacco use could lower the burden of non‑communicable diseases, saving the public health system upwards of Rs 1,500 crore annually in treatment costs. However, critics warn that sharp price spikes may also fuel a black‑market surge, undermining health gains if illicit cigarettes become more accessible.
Economic and political reactions
Stakeholders have voiced a spectrum of opinions:
- Industry bodies argue that the tax hike could erode legal market share, lead to job losses in manufacturing, and increase smuggling.
- Consumer groups highlight the regressive nature of the tax, noting that a disproportionate share of smokers belong to lower‑income brackets.
- Fiscal conservatives welcome the additional revenue, emphasizing its potential to fund health‑care initiatives and infrastructure.
- Public‑health NGOs applaud the move as a decisive step toward meeting the Framework Convention on Tobacco Control targets.
Parliamentary debates are expected to intensify as the bill moves from draft to enactment, with amendments likely focused on mitigating illicit trade and providing transition support for small‑scale manufacturers.
Conclusion
The proposed excise reform represents a watershed moment for India’s tobacco policy. By potentially quadrupling cigarette prices, the government aims to curb consumption, boost fiscal receipts, and align with global health standards. While the health benefits could be substantial, the policy also carries risks of increased illicit trade and economic strain on vulnerable consumers. The ultimate success of the bill will hinge on robust enforcement, complementary anti‑smuggling measures, and transparent allocation of the additional revenue toward public‑health programs. As the legislative process unfolds, stakeholders across the spectrum will be watching closely to gauge the balance between revenue generation, health outcomes, and social equity.
Image by: Karola G
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