- Arnav Mathur & Shaurya Singh Manhas
In 2019, we witnessed the enactment of The Prohibition Of Electronic Cigarettes (Production, Manufacture, Import, Export, Transport, Sale, Distribution, Storage And Advertisement)Act, 2019 (“Act”) by the Ministry of Health and Family Welfare in India. This move rendered the storage, possession, manufacturing, sale, transportation, distribution, and advertising of electronic cigarettes and various liquid heating nicotine delivery systems illegal.
The Act has been in effect for about five years, and now, as we stand at this juncture, it is an opportune moment to undertake a comprehensive analysis of this policy and its implications. The intervening years have allowed us to witness the actual impact of this prohibition on society.
This paper commences with an exploration of the Act and its contextual foundations. It subsequently conducts an empirical analysis to assess the effectiveness of this prohibition, scrutinising societal and economic implications. Lastly, it delves into prospective policymaking alternatives, thus enriching the discourse on electronic cigarette control vis-à-vis public health and welfare in India.
2. THE CONTEXT
In understanding the context of the Act, instances of lung injuries occurring, internationally and the marketing tactics employed by E-Cigarette companies underscored the necessity for the legislation and warranted attention as they were distinctly oriented toward minors. These companies intentionally crafted their products with a vibrant and whimsical aesthetic characterised by vivid colours and unconventional shapes, blurring the boundary between nicotine delivery systems and toys creating the urgency for a legislative response.
The Indian Council of Medical Research (ICMR), through its white paper on e-cigarettes, had recommended that e-cigarettes be completely prohibited in India. The paper had concluded that the potential health risks associated with the use of e-cigarettes, including addiction, adverse health effects, and the threat to tobacco control efforts, had outweighed any potential benefits, and a complete prohibition had been warranted to protect public health.
However, experts had contradicted ICMR stating that it had failed to present a balanced overview of the risk-benefit ratio of e-cigarettes compared to other cancer-causing combustible tobacco products. They had argued that the ICMR paper had presented a selective review of literature and had failed to consider the substantial evidence that had demonstrated the harm reduction potential of e-cigarettes. As a result, they had urged the ICMR to reconsider its recommendation to ban e-cigarettes.
Despite the differing opinions within the medical and scientific community and the dissent from some experts and advocates, the Indian Government decided to enforce a complete prohibition on e-cigarettes through the Act.
3. THE FRAMEWORK
The Act broadly defines electronic cigarettes under §3(d), covering devices of all shapes and sizes that heat substances to produce inhalable aerosols, with or without nicotine and flavours.
The Act prohibits various activities related to electronic cigarettes, including manufacturing, importing, exporting, transporting, selling, distributing, and advertising under §4. Property owners cannot allow their premises to be used for electronic cigarette storage under §5.
Penalties for violations are severe. Individuals engaging in prohibited activities may face imprisonment for up to one year or fines of up to one lakh rupees. Repeat offenders could be imprisoned for up to three years and fined up to five lakh rupees under §7. Property owners permitting storage may face imprisonment for up to six months or fines of up to fifty thousand rupees under §8.
4. THE GROUND REALITY
As of 2023, the Act's effectiveness in achieving its desired objective has proven to be severely lacking.
4.1.Explosive Market Growth
A study conducted in 2018 revealed that the Indian E-Cigarette market had already reached 7.8 million users, and it was projected to experience a staggering compound annual growth rate of 26.4% by 2024.
These devices continue to be readily available in tobacco shops, departmental stores, and openly on various online retail platforms.
4.2.Adolescent Usage and Misinformation
A survey found that 23 out of 24 adolescents aged 11-16 cited peer pressure as the main reason for trying E-cigarettes, often relying on older friends or siblings for access. Misinformation thrives due to a lack of education; some assume E-cigarettes are safer due to the lack of tobacco and appealing flavours.
Another study, GATS2 data, showed that among its 840 respondents, 23% tried vaping, 70% used tobacco, and 8% used both. 8% of E-cigarette users were daily users, and 65% used nicotine-containing E-liquids. The target consumers for these devices ranged from 11 to 27 years old.
An analysis of the data underscores that, despite the Act, adolescents continue to be profoundly drawn to these products. This popularity can be attributed to several factors, including advertising over social media, accessibility through online purchasing, pervasive influence of peer pressure, the misconception of e-cigarettes as safer alternatives due to the absence of tobacco, and the enticing appeal of various flavours offered by these products.
4.3.The Black Market
Despite the prohibition, black-market retailers have proliferated in India, selling devices openly through online portals such as vapehere.in, vapehouse.in, houseofvape.in, indiavapestore.com, vapeparadiseindia.in. E-cigarettes are also readily available on retail storefronts.
The online retailers have adopted a strict “cash on delivery” effectively evading regulatory oversight. Authorities' primary means of combating these online retailers involve targeting the courier companies they use, but even then, circumventing through false names and addresses is common.
Therefore, the Act, in its current form, has struggled to curtail E-cigarette consumption and sales effectively and has failed to achieve its desired objective of controlling electronic cigarettes industry as declared in §2.
5. THE ANALYSIS OF PROHIBITIONARY LAWS
The root of these challenges does not inherently lie within the substances themselves but instead resides within the prohibition measures imposed to control them.
To fully understand the economic impact of e-cigarette prohibition, it is instructive to look at the history of alcohol regulation. Both share key economic features, such as tax revenue generation, enforcement costs, and inelastic demand. These commonalities make the study of alcohol regulation relevant and offer insights for current debates on e-cigarette prohibition.
To illustrate this perspective mentioned above, we delve into the era of Alcohol Prohibition in the United States, from 1920 to 1933, using Jeffrey A. Miron and Jeffrey Zwiebel’s research.
During the initial days of prohibition, alcohol consumption declined sharply by 70%, but by the early 30s, consumption went up 130-140% relative to the initial days of prohibition and stayed constant. The economic reasons for this change are discussed in the following section.
Notably, the potency and strength of the liquor increased during this period primarily due to economic factors and practical considerations in the prohibitive market. Let us understand these factors.
Firstly, producers and distributors aimed to maximize their profits despite the legal risks involved. To achieve this, they often produced stronger alcoholic beverages because a smaller volume of high potency alcohol was needed to deliver the desired intoxicating effect. This made it easier to transport and conceal, reducing the risk of detection by law enforcement. Secondly, stronger alcohol was easier to hide and transport, making it more suitable for illegal distribution. Smugglers and bootleggers found it advantageous to deal in high potency alcohol to evade law enforcement. Thirdly, consumers who were willing to take the risk of purchasing illicit alcohol during prohibition often preferred stronger liquor because it provided more value for their money. They could achieve the desired level of intoxication with less volume. Lastly, illicit distillers focused on producing high potency alcohol because it required less time and effort than producing larger quantities of lower potency alcohol, contributing to the overall trend of increased potency.
Similarly, in the Indian E-Cigarette black markets there is a prevalence of high-strength nicotine liquids, typically at 5% (50mg), while weaker 2% (20-25mg) nicotine alternatives are absent. The reason for this absence can be attributed to a complete prohibition. This phenomenon proves that substances become more potent in a prohibitive economic landscape to optimise storage and transport efficiency. Therefore, prohibition limits safer, less harmful options to enter the market.
The issue at hand emanates from a shift in the supply curve for the regulated substance. When authorities impose stringent penalties such as hefty fines and incarceration on suppliers, this effectively functions as a form of taxation, elevating the overall cost of supplying the substance.
Simultaneously, there is a corresponding shift in the demand curve due to the legal consequences consumers face if apprehended. However, it is essential to note that the decline in demand is relatively modest compared to the significant upward shift in supply within a prohibitive legal framework.
The prohibitive nature of these laws compounds the cost of supply by eliminating legal avenues for dispute resolution. The law does not recognise contracts involving illegal activities, thereby rendering legal means of settling disputes unavailable.
Consequently, prohibition introduces an additional societal cost: violence. In the absence of recourse to formal authorities or the courts, suppliers or groups of suppliers often resort to violent means to resolve conflicts. The prevalence of violence increases by the relatively low marginal cost of committing violent acts within a prohibitive economic environment.
Consider an individual, ElfBro, facing a 3-year prison term under the Act. In this situation, the cost of resorting to violence, even if it leads to a risk of a 1–2-year increase in imprisonment, may not seem excessively burdensome to ElfBro. This marginal cost of committing violence is significantly low if it enhances the efficiency of their illicit business operations.
In instances where acts of violence exhibit a well-structured and efficiently executed approach, these organizations tend to establish a dominant position within their respective markets by eradicating competing entities. Consequently, such organizations evolve into what can be categorized as cartels.
It may initially appear imprudent and ill-conceived to postulate that E-cigarette suppliers could potentially form organized criminal cartels. However, historical precedents, such as the establishment of the Gulf Cartel (Cartel De Golfo) during the era of alcohol prohibition in the United States, serve as compelling evidence. This cartel specialized in smuggling alcohol across national borders and diversified into various clandestine enterprises, including 'gentleman's clubs' and an automobile theft syndicate. Once alcohol prohibition ended, they ventured into another prohibited substance - Cocaine. Therefore, the existence of a cartel is contingent not on the nature of the substance but rather on its legal status.
Examining price dynamics, it is evident that substances subject to prohibition experience substantial price inflation. Alcohol prices, for instance, surged by threefold, while cocaine prices skyrocketed by twentyfold in a prohibitive market. Within the prohibitionary context, commodities such as alcohol and e-cigarettes encounter economic obstacles that have adverse effects on both consumers and the state. Low-income individuals bear the brunt of increased prices resulting from shortage. Simultaneously, it is worth noting that the state experiences a significant decline in tax revenue, as emphasised by the research conducted by the Tax Foundation regarding the taxation of e-cigarettes. Therefore, the presence of a restrictive environment presents economic challenges for both customers and government revenue sources.
A device known as the 'Elfbar TE6000' retails for RM35 (INR 663) in Malaysia. However, the same device commands a significantly higher price in India, typically ranging between INR 1500 to 2400, representing a 70% price increase. Similarly, the 'Uwell Caliburn AK-2’ device is priced at RM60 (INR 1085) in Malaysia, yet its cost escalates by 81% to INR 5300 in India.
Therefore, this considerable price disparity means that Indian consumers often receive sub-standard and unregulated products at a 70-80% markup compared to their Malaysian counterparts.
Furthermore, vaping bans could inadvertently increase traditional cigarette smoking among non-smokers. Factors like limited harm-reduction alternatives and nicotine dependency drive this transition. A study supports this, showing a correlation between vaping restrictions and increased cigarette use. While aimed at improving public health, such bans could paradoxically create a new demographic of cigarette smokers, undermining the intended health benefits.
6. THE ALTERNATIVE APPROACHES
In pursuing effective regulation, policymakers should weigh various factors and explore alternative approaches apart from blanket prohibition. Here, we delve into a range of harm reductionist regulatory models for E-cigarettes. While we recognise that none of these models is flawless, each presents unique advantages that can be harnessed to formulate a policy tailored to India's needs.
6.1.Medicinal Product Model
One policy framework involves regulating e-cigarettes as medicinal products. This framework enables the restriction of legal access to e-cigarettes, except under specific prescribed circumstances. Its primary objectives are to deter non-smokers from starting e-cigarette use and to ensure accurate product labelling.
However, there are concerns associated with this approach. Firstly, illegally sourced e-cigarettes may pose more significant health risks compared to quality-assured products. Secondly, requiring a medical prescription can create a barrier for those seeking e-cigarettes as a smoking cessation aid.
6.2.Regulation as Poisons Model
Another policy framework entails a component ban and the regulation of e-cigarettes as poisons. This framework limits nicotine concentration in e-liquids and prohibits e-liquid flavours that appeal to young people. The benefits of this approach are twofold: it can reduce the addictiveness of e-cigarettes through nicotine restrictions and deter non-smokers and youth from initiating e-cigarette use via flavour restrictions.
However, it is essential to note that banning e-liquid flavours from quality assured sources is more harmful than allowing illegal sources with sub-standard quality to foster under black markets, such a policy does not prevent youth from possessing e-cigarettes obtained from black markets or adults via proxy purchases.
6.3.Consumer Product Model
There can also be regulation as a consumer product. This involves mandating quality control standards for e-cigarettes and requiring specific packaging standards, such as nicotine concentration indicators and tamper-proof containers. This approach promotes consumer protection and facilitates greater accessibility to a less harmful alternative for current smokers.
However, there are concerns with this approach. It may unintentionally depict e-cigarettes as safe or healthy products due to their regulation as consumer goods. Additionally, making e-cigarettes more accessible this way could increase their availability to youth.
6.4.Stricter Compliance Model
An alternative regulatory path is reinforcing prohibition and ensuring stringent compliance with the Act. Recently, the Government issued a public notice directing stricter compliance. The judiciary, as well, through Shiv Vinayak Gupta v. Union of India and Priyansha Gupta v. Union of India, has issued directions for effective compliance with the Act. The Government has also launched a portal to report the violations under the Act in order to ensure effective compliance.
However, the larger goal and the core intent of the legislation is to safeguard public health and protect this country's youth. Intensifying compliance measures may have unintended consequences. It could lead to resource-intensive endeavours, demanding significant investments in monitoring, enforcement, and legal proceedings. This allocation of resources may divert attention and funding from critical public health initiatives.
As shown previously, instead of a blind and complete ban, a more pragmatic and strategic move could benefit the stakeholders and accomplish the more significant aim of public health protection.
6.5.Mixed Model Approach
In India, a comprehensive "mixed model" for e-cigarette regulation is the need of the hour. Under this model, stringent quality control standards and accurate labeling will be enforced to ensure the safety of e-cigarette products. Nicotine concentration in e-liquids will be limited to deter addiction, while the banning of flavors that appeal to young people aims to discourage youth initiation. Legal access to e-cigarettes will be restricted to adults, with robust age verification mechanisms in place, and measures will be explored to prevent the transfer of these products from adults to youth. Public awareness campaigns will be initiated to educate the public, especially non-smokers and youth, about the risks associated with e-cigarette use and promote the availability of smoking cessation aids. A dedicated regulatory authority will monitor and enforce these regulations, regularly inspecting and testing e-cigarette products for compliance. Furthermore, a commitment to ongoing research and adaptation of regulations based on evolving trends and evidence is essential to ensure the continued effectiveness of this model.
The mixed model combines elements from the Medicinal Product Model (quality control and labeling), the Regulation as Poisons Model (nicotine concentration and flavor restrictions), and includes unique regulations to address India's specific needs, such as stringent access control and public awareness campaigns. The aim is to strike a balance between harm reduction and accessibility while mitigating potential risks.
While combining elements from various models adds a layer of complexity, caution must be exercised, as with the implementation of any individual regulatory model, to prevent unintended consequences such as driving consumers toward illicit or more hazardous alternatives. The overarching aim is to create a balanced approach that mitigates risk while maintaining reasonable accessibility.
The Act, while well-intentioned, grapples with limited effectiveness. A thriving market, enduring accessibility, and the emergence of a black market challenge its impact. Additionally, unintended consequences include the rise of more potent nicotine products.
To chart a more promising course, policymakers should explore combination of alternative regulatory avenues. Options like regulation as medicinal products, poison control, and consumer products offer framework for a balanced approach that safeguards public health, respects consumer choices, and addresses enforcement complexities. Rather than an outright ban, a strategic and pragmatic approach aligns with the overarching goal of protecting public health and the nation’s youth.