Double whammy of keeping low-tier cigarettes cheaper

There has not been any significant price rise in the low-tier cigarette segment in recent years. This trend is reshaping consumer behaviour, as smokers are turning to low-priced cigarettes amid the rising costs of top-tier alternatives.

The absence of any significant price hike in the low-tier segment raised concerns regarding its impact not only on public health, but also on revenue generation.

Data from the Bangladesh Economic Review reveals that the price of low-tier cigarettes has seen only marginal increases. This trend has resulted in cheaper alternatives remaining accessible to low-income individuals, despite continuing efforts to discourage smoking through price adjustments.

During the fiscal year 2018-2019, the National Board of Revenue (NBR) set the price of low-tier cigarettes at Tk35 per pack. However, in the subsequent five fiscal years, the price has only seen a modest increase of Tk10, reaching Tk45 per pack by the current year, averaging just Tk2 per year.

This has proved insufficient to deter the original consumers of the low-tier segment, which are typically low-income populations. But its impact extends beyond merely failing to discourage low-tier customers; it has also provided an escape avenue for financially struggling consumers of top-tier cigarettes, who opt to switch to cheaper alternatives when top-tier options become unaffordable.

Dr. Syed Abdul Hamid, Professor at Dhaka University’s Institute of Health Economics, emphasises that while increasing prices is not the sole solution to reducing tobacco use, it remains a critical tool.

“We need to focus on building social awareness so that new tobacco users do not emerge. But price increase remains an important tool in curbing tobacco use,” Professor Hamid said.

But the absence of any significant rise in prices in the low-tier segment is clearly diminishing the highly valuable tool of pricing consumers out of smoking habit.

Anti-smoking advocates, however, have called for price hikes in all segments proportionate to inflation. They argue that increasing prices in line with inflation across all segments offers a more pragmatic and comprehensive approach to curbing tobacco use while safeguarding public health.

By ensuring that prices rise uniformly across all segments and in alignment with inflation, the government can create a more equitable pricing structure that discourages smoking habits across the entire population.

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