India’s ministry of health is set to prohibit the sale of loose cigarettes, which would be a big blow to tobacco companies because an overwhelming 70% of the cigarettes sold in India are loose.

The proposal to ban the sale of single sticks was made by an internal panel to the healthy ministry. “The ministry has accepted the recommendations of the committee and a draft note for cabinet has been circulated for inter – ministerial consultation,” health minister J.P. Nadda said in a statement in the upper house on Tuesday.

Many smokers in India, including minors and students, prefer buying loose cigarettes because they are much more affordable than the whole pack.

The government increased the excise duty on cigarettes in the range of 11% and 72%, depending on the length of the stick, in this year’s budget. Despite this hike, cigarettes are still much cheaper in India compared to Western countries.

A pack of Marlboro will cost $1.93 in India while in Australia it can cost as much as $16.23 and in Singapore it can cost $9.43. A single Marlboro stick costs Rs10 ($.15) in New Delhi.  Individual cigarettes do not carry a statutory warning on smoking. But if such a ban does come into place, it would be hard to monitor.

“Since a large part of cigarette sales happens from kiosks, it is questionable whether the rule can be applied in practice. After all, one may think, how many kiosks can officers regulate?” said a research report by brokerage Kotak Securities.

“However, we note that, as the ban on cigarette smoking in public places illustrates, with sufficient incentives for authorized officers, monitoring can be fairly strong,” it added.

India is home to the largest number of smokers in the world after China. But cigarette smokers are only a small fraction of tobacco users in the country. According to a 2010 World Health Organization (WHO) report, the estimated number of tobacco users in India is 274.9 million, with 163.7 million users of only smokeless tobacco, 68.9 million only smokers, and 42.3 million users of both smoking and smokeless tobacco.

Bad news for cigarette makers

This ban would hit companies such as multi-business conglomerate ITC, hard. As India’s largest cigarette maker, it earned $164. 65 million in profits from cigarettes during FY14.

Shares of the company fell by 5% soon after the announcement was made.

The matter would be presented before the union cabinet soon and a draft note has already been circulated for inter-ministerial consultation, Health Minister J.P. Nadda informed the Rajya Sabha Tuesday.

The cabinet note comes after recommendations were made by a committee formed by the ministry, to review Cigarettes and Other Tobacco Products (Prohibition of Advertisement and Regulation of Trade and Commerce, Production, Supply and Distribution) Act, 2003 (COTPA), Nadda said in a written reply.

He said the expert panel has recommended "prohibition on sale of loose or single stick of cigarette, increasing the minimum legal age for sale of tobacco products, increasing the fine or penalty amounts for violation of certain provisions of the Act as well as making such offences cognizable".

The ministry has accepted the committee's recommendations and a draft note for the cabinet has been circulated for inter-ministerial consultation, the minister said.

The move comes close on the heels of the government deciding to make it mandatory for tobacco companies to devote 85 percent space on packets of cigarettes and other tobacco products to warn against the ill effects of tobacco consumption.

Till now, tobacco companies were required to devote only 40 percent of the space on packets to pictorial warnings against tobacco use.

The World Health Organisation (WHO) framework convention on tobacco control, of which India is a signatory, states that countries "shall endeavor" to prohibit such sales as it makes them more affordable for minors.

Another important recommendation of the panel is that the fine for smoking in public should be increased to a whopping Rs. 20,000 from the present Rs. 200, a senior health ministry official said.

It has also suggested that the minimum age for consumption of tobacco products be increased to 25 years from 18.

The panel has also recommended that public smoking be made a cognizable offence, meaning that a person caught smoking in public can be prosecuted in a court of law.