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May 9th, 2016:

India’s ITC resumes cigarette production with larger health warnings | Reuters

NEW DELHI India’s biggest cigarette maker, ITC Ltd, said on Monday it had resumed production in phases, complying with new rules on pictorial warnings from the federal government.

The company had shut its plants from May 4 as it worked to get much larger health warnings on cigarette packs, even as a court hears objections to the new rules.

“ITC cigarette factories have resumed production in a phased manner, with the specified 85 percent graphical warning pending hearing by the Karnataka High Court,‎” a company spokesman told Reuters in an email.

Jury is still out on e-cigarettes

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The fight against tobacco is not over

The Boston Globe presents the Harvard Kennedy School PolicyCast, a weekly podcast on public policy, politics, and global issues. HKS PolicyCast is hosted by Matt Cadwallader.

At this point, efforts to end tobacco use seem almost passe.

While it wasn’t so long ago that smoking was ubiquitous, most millennials, the largest generation in the country, have never been able to smoke in a Massachusetts bar or restaurant, much less in an office or on an airplane.

For many of us, the fight against tobacco has fallen off the radar. But that doesn’t mean the problem has been solved.

“Tobacco’s going to kill 1 billion people in the 21st century,” says Dr. Howard Koh on this week’s Harvard Kennedy School PolicyCast podcast. “There’s no other condition that reaches those extraordinary figures.”

Dr. Koh, a professor at the Harvard TH Chan School of Public Health and former assistant secretary for health at the US Department of Health and Human Services, says that it’s not yet time to declare mission accomplished.

“We have to keep talking about this huge issue because so many people are suffering and dying preventable deaths due to tobacco dependence. . . . We still have young people trying cigarettes every day. Several thousand a day, in fact, start for the first time.”

Efforts to curb nicotine addiction have taken on new dimensions in recent years, and in several ways Massachusetts has been at the forefront.

The national movement to raise the minimum age to buy tobacco from 18 to 21 began in Needham back in 2005, and has been picking up steam. Earlier this year Boston followed suit.

Just recently, the Massachusetts State Senate passed a bill that would raise the age statewide, and Governor Baker has indicated that he supports the idea “conceptually.”

Passing such a law would make Massachusetts just the thirdstate to do so after Hawaii enacted the change in January and California passed its law in May.

This year another big change came on opening day at Fenway Park. While smoking has been banned in the park for many years, the use of smokeless tobacco, nicknamed spit or chew, has long been a part of baseball culture.

Now due to new regulations enacted by the city of Boston, Fenway is one of a handful of Major League Baseball stadiums where even smokeless tobacco is unwelcome. This was in response to a study released last year by the US Centers for Disease Control and Prevention, which found that the use of chew among baseball players has a significant impact on whether high school athletes pick up the same habit.

Perhaps the most intriguing issue in tobacco control has been the rising popularity of e-cigarettes.

Koh describes e-cigarettes as a “double-edged sword” that have added an unexpected twist to public health officials’ efforts. Two camps have emerged, one arguing that e-cigarettes can be a useful tool in helping smokers quit, and the other taking a more cautious approach, worried that they may be used by teenagers as a stepping stone into further tobacco use.

So far the data have been inconclusive. A recent study found that 16 percent of US high schoolers had tried e-cigarettes, a more-than tenfold increase over the last five years, but it also came at a time when cigarette use among the same group had dropped significantly.

Tobacco control isn’t a new topic, but in the effort to stop 1 billion preventable deaths, we still have a long way to go.

ITC, other tobacco firms to restart cigarette production in phases

KOLKATA: Cigarette makers led by market leader ITCBSE 0.70 % Ltd are going to resume production in a phased manner with packs having 85% pictorial warning to comply with the Supreme Court’s order, even as they say this will make a further dent on legal cigarette sales.

The new packs will have just 15% of the total area for branding and printing other details such as name of the factory, price and date of manufacturing, which ITC said will put its products at a disadvantage in the retail shelves since the illegally smuggled or locally produced tax-evaded packs will have very little or no warning at all. In a notice posted on the Bombay Stock Exchange on Sunday afternoon, ITC said its cigarette factories are commencing production progressively.

A company spokesperson later said: “ITC cigarette factories have resumed production in a phased manner with the specified 85% graphical warning pending hearing by the Karnataka High Court.”

The company had shut production on May 4, saying it was not in a position to comply with the Supreme Court order. The court had asked cigarette makers to produce packs with 85% pictorial warning until the Karnataka High Court passes its judgement on the fate of the various writ petitions filed by the industry challenging this requirement.

The apex court has asked the high court to pass its judgement within eight weeks. Previously, cigarette packs were required to carry graphical warning covering only 40% of the front of the pack. The Indian legal cigarette industry has been facing a continuous drop in demand because of high taxation and the growth of duty-evaded illegal cigarettes that do not carry pictorial warnings. Since 2012-13, the excise duty on cigarettes, at a per unit level, has gone up cumulatively by 118% with increase in taxation in every successive year.

High-Yield Funds With Cash to Burn Chase Tobacco Bonds’ 51% Gain

High-yield municipal bond fund managers have cash to burn. So do American smokers, who have extra money after filling their gas tanks.

The two groups, each in their own way, are driving a rally in the $34 billion tobacco-bond market that’s outpacing just about every other investment.

High-yield tobacco securities have surged 10.2 percent in 2016, the most among all segments of the $3.7 trillion municipal market, Barclays Plc data show. That follows gains of 15.8 percent and 19.2 percent in the past two years. The 51 percent return since the start of 2014 beats more than 80 percent of stocks in the S&P 500 Index and close to 90 percent of the Russell 2000 Index of small-cap company shares, data compiled by Bloomberg show.


To explain much of the gain, one needs only to follow the money. Individuals added cash to high-yield muni funds for 100 of the past 122 weeks, lifting their assets to a record $82 billion from $58 billion at the start of 2014, according to data from Morningstar Inc. and Lipper US Fund Flows. With Puerto Rico heading toward an unprecedented restructuring, money managers who once snapped up the island’s bonds are now avoiding them, leaving the tobacco securities one of the few available alternatives.

The other side of the rally stems from signs that American smokers are using savings at the gas pump to buy more cigarettes. The shipments backing the debt as part of a 1998 settlement with tobacco companies increased last year by 1.9 percent, the most ever, according to data from the National Association of Attorneys General.

“If you’re getting lots of money into a high-yield fund and you’ve decided that you’re not going to buy Puerto Rico, like most people, really tobacco is your only other option,” said Craig Brandon, co-director of municipal investments in Boston at Eaton Vance Management, which oversees $32.5 billion of the debt. The uptick in smoking “gives you a credit reason to buy tobacco at a time when you really need a high-yield sector to invest in.”


Buying tobacco bonds has long been considered a risky move. Most are rated junk because when governments first sold them more than a decade ago, which gave them advances on money they are set to receive from Reynolds American Inc., Lorillard Inc. and Philip Morris USA, they didn’t anticipate how quickly Americans would give up smoking. And the more cigarette sales fall, the longer it will take for governments to collect the payouts.

Moody’s Investors Service projects that a 4 percent annual decline in cigarette shipments would cause 80 percent of the bonds to default. From 2007 to 2014, the drop was even bigger: Shipments fell an average of 4.7 percent annually, according to NAAG data.

The decline in oil prices in the second half of 2014 — from over $100 a barrel to about $53 — halted the decline because gasoline fell, too, giving people more disposable income. The national average for a gallon of gas in the U.S. is $2.22, about 40 cents lower than a year ago, according to the American Automobile Association.

Smokers “save more because of lower gas prices and they tend to spend it on cigarettes,” said Vikram Rai, head of muni strategy at Citigroup Inc. While the boost in cigarette shipments “could be a flash in the pan,” he says high-yield investors should consider buying the securities and definitely hold onto those they currently own.

Some of the biggest and most-frequently traded tobacco bonds are at levels not seen since before the financial crisis.

Two of the three largest single tobacco bonds, from Ohio’s Buckeye Tobacco Settlement Financing Authority and California’s Golden State Tobacco Securitization Corp., traded in the past two weeks at about 100 cents on the dollar, the most since February 2008 and August 2007, respectively, data compiled by Bloomberg show. Both have a June 2047 maturity and ratings six steps below investment grade by Moody’s, which projects annual shipment declines of 3 percent would cause them each to default.

“I’m pretty cautious at these levels — there’s been a lot of gains,” said Alan Schankel, a managing director in Philadelphia at Janney Montgomery Scott. “The upside is limited as you approach par, and the downside is there.”


Tobacco-bond returns have also dwarfed other junk asset classes. High-yield corporate bonds and loans returned 4.75 percent since the start of 2014, Barclays data show.

While buying after the rally isn’t the best entry point, the dynamics driving it don’t seem likely to change this year, Citigroup’s Rai said. Even if prices remain steady, the largest tobacco bonds offer investors yields above 5 percent at a time when top-rated munis maturing in 30 years deliver half as much.

“Tobacco bonds are priced properly because we know what the moving parts are; we know how to model that risk,” Rai said. “If you’re content with a 6 or 7 percent return, even if you buy them now, you’ll get that.”