Illicit alcohol trade in India Illicit trade in

Illicit alcohol trade in India Illicit trade in Alcohol in India: Addressing Policy and Regulatory Framework and Governance gaps AB In. Bev 19 September 2019, New Delhi Jeff Hardy Director-General TRANSNATIONAL ALLIANCE TO COMBAT ILLICIT TRADE

Pharmaceuticals • Counterfeit medicines account for as much as 10% to 30% in some countries in Asia, Africa and Latin America • And worth up to US$200 billion annually

Petroleum • Worldwide, $133 billion of fuels are illegally stolen, adulterated, or defrauded. • 25% of petroleum fuels in Tunisia is illicit or adulterated

Tobacco • Worldwide, one in every ten cigarettes is illicit. • That’s equal to 450 billion sticks every year.

Gemstones • South Africa’s illegal trade in precious metals is estimated at US$1. 3 billion a year • Myanmar’s US$40 billion jade trade has been called the ‘biggest natural resource heist’ in modern history

Fishing • Global losses to illegal fishing are US$15– 36 billion. • Representing as much as a third of the global marine capture.

Pesticides & Agrochemicals • Share of illegal pesticides on the global pesticide market is as high as 25%.

Counterfeiting & Piracy • Counterfeiting has grown to US$461 billion. • Increase of more than 80% in less than 5 years. • Digital piracy in music, movies and software is more than $200 billion.

Sector focus AGRI-FOOD PETROLEUM ALCOHOL COUNTERFEITING & PIRACY PHARMACEUTICAL PRECIOUS METALS & GEMSTONES FISHERIES FORESTRY PESTICIDES TOBACCO TRAFICKING IN PERSONS TRAFICKING IN WILDLIFE

Address common vulnerabilities • Air, sea, land transport • Express carriers • Internet platforms • Border control • Corruption in customs • Free trade zones • Regulatory gaps

Expose associated crimes • Financial fraud • Money laundering • Human trafficking • Organized crime • Corruption

Drive the international agenda

THE GLOBAL ILLICIT TRADE ENVIRONMENT INDEX PUBLICATIONS Reports Policy recommendations Regional Briefings Country Briefings Asia Europe Latin America Serbia, Bosnia And Montenegro Free Trade Zones Colombia Costa Rica Dominican Republic Ecuador Israel Myanmar Tunisia UAE

An understanding of illicit alcohol Counterfeits: Sold as legal brands or empty bottles of legal products refilled with cheaper alcohol. RECORDED Licit Smuggling: Illegal imports of ethanol as raw material and illegal imports of alcoholic beverages as finished product. Illicit UNRECORDED Illegal artisanal: Illegal artisanal alcoholic beverages manufactured for commercial purposes without permits. Legal cross border trade Surrogate: Alcohol not intended for human consumption, such as pharmaceutical alcohol, perfumes. Legal artisanal/homemade Tax leakage: Legally produced alcohol on which excise tax was not paid in the jurisdiction of production.

Illicit alcohol is a worldwide problem • The problem exists in every region: developed and developing countries. • Wide variety of factors drive the illicit market: − Local traditions − Consumer preferences − Business practices − Government policies Source: International Alliance for Responsible Drinking

Scale of the problem • Some examples: − Brazil: 28% − Cameroon: 56% − Dominican Republic: 29% − India: 45% − Mexico: 34% − Mozambique: 66% − Tanzania: 51% − Uganda: 61% Liters of pure unrecorded alcohol consumed per capita in 2015 Source: Journal of Global Health

Health risks • Illicit alcohol claims lives and causes serious injuries −Turkey: 23 in 2019 −Costa Rica: 19 in 2019 −Dominican Republic: 9 in 2019 −Indonesia: 141 in 2018 −Malaysia: 45 in 2018 −Russia: 1200 in 2016 India: − 150 in Assam & 100 in Uttar Pradesh and Uttarakhand in 2019 − 100 in Mumbai in 2015 − 136 In Ahmedabad in 2009 − 170 in Karnataka and Tamil Nadu in 2008 • Unsanitary production facilities • Produced using toxic substances: methanol, batteries, nail polish remover

Fiscal risks • Lost corporate and personal income taxes • Loss of excise duties • Examples: − EU: Loses € 1. 3 billion of revenue annually and 23, 400 jobs − India: Tax loss of Rs. 6, 309 crore − Myanmar: Lost US$50 million in tax to beer smugglers − UK: Lost £ 1. 3 billion in excise revenue

Illicit alcohol undermines the UN Sustainable Development Goals

Enablers of illicit alcohol in India • • • Consumer perception and awareness Ø Lack of proper awareness on the harms of illicit alcohol Prohibition Ø Perceive fewer health risks Availability Ø Difficult to differentiate Affordability legitimate brands from Weak regulation and enforcement counterfeits Ø Homemade alcohol is part of a local tradition

Enablers of illicit alcohol in India • • • Consumer perception and awareness Ø Ban of alcohol underground alcohol markets Prohibition Ø Several states have revised the Availability ban Affordability Weak regulation and enforcement

Enablers of illicit alcohol in India • • • Consumer perception and awareness Ø Heavy controls on the availability and sale of legal alcohol displace Prohibition consumption into the illicit market Availability Ø For example: In West Bengal, illicit Affordability homemade alcohol is available for sale almost anywhere and Weak regulation and enforcement anytime Ø IARD survey: 80% of country hooch drinkers and 75% of homemade alcohol drinkers said these drinks were easier to obtain

Enablers of illicit alcohol in India • • • Consumer perception and awareness Ø Lower prices of illicit alcohol drives sales Prohibition Ø Large price gap between licit Availability and illicit alcohol: high taxes Affordability Ø High taxes are Weak regulation and enforcement counterproductive as they stimulate demand for illicit alcohol products

Enablers of illicit alcohol in India • • • Consumer perception and awareness Ø Regulations on the manufacture and sale of Prohibition alcohol vary from state to state Availability Ø Many frameworks offer only Affordability partial solutions Weak regulation and enforcement Ø For example: Fiscal stamping has emerged as a regulatory measure in India. These are often easy to counterfeit and can confuse consumers.

India’s structural capability to address illicit trade Along with more than 80 countries, India was evaluated on: policy, legal, regulatory, economic, trade, institutional and cultural indicators THE GLOBAL ILLICIT TRADE ENVIRONMENT INDEX 2018 A report by The Economist intelligence Unit Commissioned by

TRACIT Recommendations • • • Raise awareness of illicit alcohol Improve accessibility to legal products Incentivize local producers to legalize their production Enforce laws and impose sanctions Normalize import of foreign spirits Rationalize tax policies and subsidies Improve ethanol regulation Ensure fiscal marking techniques are scrutinized Promote the creation of local private-public partnerships

www. TRACIT. org @TRACIT_org @Transnational Alliance to Combat Illicit Trade