Health Policy Assignment: Effect of Fat Tax on Food in India
Question
Task: You have been asked to produce a Technical Report on Policy Options to Prevent Nutrition- Related Chronic Diseases. This health policy assignment will allow you to explore current issues in nutrition- related chronic disease and is something you might be asked to do when working in public health.
Answer
Introduction
Obesity, as well as overweight, can be regarded as the abnormal or the excessive accumulation of fat affecting the health of an individual. According to the report published by WHO (1), it has been found that obesity across the world has tripled since 1975. More than 1.9 billion adults in 2016 above the age of 18 years across the world were found to be obese. Since the past few decades, it has been found that the transition from communicable to non-communicable disease has increased across the entire country. This communicable disease creates 60% of the deaths thereby contributing to 47% of the global burden of diseaseWHO (1). Further, it has been found that India and China witness the largest death rate due to these communicable and non-communicable diseases.
The survey carried out by the Ministry of Health and Family Welfare has highlighted that individuals whose Body Mass Index (BMI) is more than 25 kilogram per square meter can be considered obeseWHO (1). It has been found that most of the states in India have experienced a sharp increase in the number of obsessed citizens. One of the crucial reasons for this higher growth of obesity rate across the Indian states is due to diabetes mellitus. Due to this alarming rate of increase of the burden of obesity, the Government of Indian (GoI) has established the target of controlling the epidemic within 2025 as per the National Action Plan for Prevention and Control of the Non-Communicable disease (Krishnamoorthy2). This will make it easier to achieve the target and thus reduce the saturated transfats and the fats in the food products manufactured in India.
A fat tax is a kind imposed on the street and the junk foods sold across the country to control obesity and other diseases. In India, Kerela is the first state to impose the fat tax even on the items that were sold in five-star restaurants. The rate of taxation was 14.5% that aimed to reduce the growing addiction of the citizens to junk food (Menon3). Many other countries have tested and introduced taxes on food items to tackle the negative externalities that are linked with healthy and unhealthy food items. However, it has been found that the imposition of taxes is likely to increase the price of commodities that leads to the demand for unhealthy food items. This study will highlight the effect of the fat tax in India and how this tax should be targeted across Indian citizens.
The materials and the methods applied
This study has been carried out through a literature review that aimed at identifying the effect as well how the tax is to be targeted concerning India. The search engines that were used in the collection of literature included ScienceDirect and Google Scholar to find out the literature associated with fat taxation. On the other hand, the varied search strategy includes the use of terms such as “Fat Tax”, “effect of Fat Tax”, “Target of Fat Tax”, “Challenges faced in imposing Fat Tax” where the date range was from 2014-2021.
The articles from which literature has been gathered were open to the users for access and all of them were published in the English Language. Moreover, it has been found that a considerable focus is also been laid on the varied states across India according to their date of imposition of the Fat Tax, the impact as well as the challenges faced by them in doing so. The news articles and Government publications were also used to conduct the literature review analysis in this study.
Issues relevant in transforming the scientific evidence into practice, impact on the stakeholders as well the policy measures
According to the report published by the Directorate of Vanaspati, Vegetable Oil and Fats (DVVOF) and the Department of Commerce, it has been found that the production of edible oil in India accounted for 10.66 million tons which from 10.06 million tons in 2018-2019 (Commodity Profile of Edible Oil for April 4). Out of these the imports of edible oil in India accounted for 4.79 million tons which were 14.78 in 2018-2019 (Commodity Profile of Edible Oil for April 4). On the other hand, the report also published that the total available edible oil for domestic consumption is 14.85 million tonnes in 2019 which was 24.39 million tonnes in 2018-2019 (Commodity Profile of Edible Oil for April 4). The production trend of domestic oilseeds, as well as that of edible oil, has been highlighted in the below figure:
Fig: Production Trend of Domestic Oilseeds
Source: Commodity Profile of Edible Oil for April-2019
Fig: Production Trend of Domestic Edible Oil
Source: Commodity Profile of Edible Oil for April-2019
The processed food market in India is growing due to the varied supply-side factors such as the availability of water, the variety of crops, the packaging technology, the greater level of livestock base as well as the improved level of technology. The different types of policy measures that lay a significant effect on the fat production sectors operating across India include exemption of the taxation rate to cent percent and upto 25% for the newly established companies (Commodity Profile of Edible Oil for April 4). Further, it has been found that there is the provision of 100% allowance on the export-oriented sectors operating in India where their taxes have been waived in the export-oriented sectors as well as the automatic routing process included with Foreign Direct Investment (Commodity Profile of Edible Oil for April 4). There has also been the establishment of the varied departments and the Ministries that are associated with the salt and the sugar market by considering the potentials linked with the health consequences. All these types of policy initiatives are likely to influence the behavior of those citizens who are associated with the consumption of those items rich in sugar, salt, and fat.
Aspects to be considered before setting the target of fat tax in India
The Government of India, before the imposition of the Fat tax, must check the average calories of the citizens across different states, the number of hours spent by the citizens in carrying out the exercise, the average number of pounds which the citizens were trying to lose as well as the number of overweight individuals(Krishnamoorthy2). On considering all these aspects, the Government must decide to add a higher tax rate on unhealthy food and drinks that highlight the rising rate of obesity across all states in India. Further, it has been found that imposition of tax by at least 20% on sugar-sweetened drinks is likely to reduce the obesity rate by 3.5% as well as save the heart attacks of an average of 2700 citizens in India (Commodity Profile of Edible Oil for April 4). This growing rate of obesity has also led to an increase in the consumption of cholesterol as well as other associated disease such as hypertension, cancer as well as diabetes. The crucial goal of the Indian Government to be taken into consideration before the imposition of the fat tax is to lower the overconsumption of the citizens and thus curb the sale of unhealthy food that will assist in controlling the disease to a great extent.
India records an alarming level of per capita fat intake across every state which is one of the crucial reasons that must be taken into consideration by the Government. The survey conducted by Downtoearth.org (5) has opined that there has been an increase in almost 10 grams of fat within the past 18 years across the rural and urban areas. All the major states across India have highlighted a considerable increase in the consumption of fatty food which ranged between five to six grams in 1993-94 to 17-18 grams in 2011-2012. There has been an increase in the consumption of animal and plant sources of energy among the Indians across all states. However, it has been found that consumption of the source of animal protein is three times higher than the consumption of plant protein in the industrialized states.
The recommended level of fat consumption in India is 29.5 gm in the urban areas and 16.1 gm in the rural areas. However, it has been found that the adults in the urban centers consumed 51.6 gms of fat per day which is much higher than the recommended level. More than 84% of the rural population in the Indian states derived energy per day from this visible fat, oil as well as the added fats (Downtoearth.org5). Only 20% of the urban population depends on the energy derived from fats. Among these, the north Indian states have the highest consumption of the added fat i.e. 45.9 gms (Downtoearth.org5). This was only 22.9 gms in Southern India. The consumption of this higher level of fats is one of the crucial reasons contributing to obesity among Indian citizens (Downtoearth.org5). It is the responsibility of the Indian Government to analyze this consumption of fat among the urban and the rural population before setting the limit of the “Fat tax”.
The promising growth of PepsiCo, McDonald's, Coca Cola and Nestle have earned higher revenue in the Indian economy and thus all the companies are trying their best to take the share in this economy. The carbonated drinks sector market has grown at an average of 3.7% between 2017-2021 whereas the packaged food sector has grown by 8% during the same period (Press Information Bureau5). The Government of India must try to bring some regulatory changes across the Beverage Association in India to bring the entire situation under control. Further, the Government must also try to improve the nutrient profile thereby considering the health of the consumers. The different types of complex health issues that are faced by the citizens due to consumption of these beverages must be taken into consideration to a great extent. There should be planned regulations on setting the limits on the consumption of fatty food items (Kalra6). Although India is much slower to finalize the rules on the consumption of fatty, sugary, and salty products, health advocates have stated that it is important to safeguard public health.
The price difference of the products before and after the imposition of the “Fat tax” must be considered by the Government. The smaller difference in the price is likely to affect the consumers as a section of the customers in India prefers to opt for the cheapest option, without compromising the fat content (Misra7). The effect can be considered to be the highest in the economical areas in India where obesity is one of the greatest problems. The Government of India must also check the negative impact of Fat tax on retailers. The sale level of the stores gets affected as consumers prefers to opt for the lower-cost options (Misra7). A considerable part of the fat tax must also be provided with subsidies so that it becomes easier for the consumers to opt for a healthier choices by keeping the retailers neutral.
Health effect of the fat tax
The increase in the tax for the consumption of unhealthy junk food must encourage individuals to consume healthy food such as vegetables and fruits mostly among the younger adults. This has been observed by various researchers who carried out their studies on the imposition of the taxation level on the sugar-sweetened drinks that is likely to reduce its consumption among the youths to a great extent.
As India has set a fat tax limit to control the obesity and the consumption of junk food, it has been found that this tax limit has helped both the lower and the higher income groups to lead a healthier life free from varied types of communicable diseases. On the other hand, the studies conducted by several other authors have focused on the positive effect of fat taxation. The effect of the increase in the price of the sugar-sweetened beverage has led to a slower reduction in the number of obese and overweight individuals. Since 2016 after the imposition of the first Fat tax in India, the citizens have become more conscious on the making their food choices thereby curbing the obesity (Pandey8). Although the food habits of the citizens are changing dramatically, there has been controlling on the lifestyle diseases that were on the rise with the aim of the Government to check it with Fat tax. In the southern states of India, there has been stopped on the global fast-food chains such as KFC, McDonald’s, Burger King, and Dominos’ after the announcement of the Fat tax by the Indian Government (Kuriakose9).
Another important effect of this Fat Tax includes the role of price policies affecting the higher-income individuals rather than the lower-income households, thereby improving the level of absolute expenditure for the higher-income families. This is because of the occurrence of improved level of consumption and disbursement on soft drinks, alcohol, and snacks that increases along with the household income(Downs10). On the other hand, another crucial benefit of taxation includes improved revenue that are used to tackle the health programs and the initiatives to support the development of the nutritional level, the obesity, food quality as well as encouragement of the physical activities to a great extent.
Challenges
In the case of a competitive market scenario like India, the prevalence of taxation is based on the relative level of price elasticity linked with the demand and the supply of the products. However, it has been found that when the demand curve becomes price inelastic, the burden of these taxes leads to a fall in the quantity demanded by a small extent(Law 11). On the other hand, when the tax curve will be more elastic, the burden of tax is more prone to fall on the suppliers rather than the buyers. The producers of these taxable commodities might not pass the burden to the consumers in such cases. This can also be linked with Pigou’s problem which states that the collection of tax can be tackled through negative externality without considering the transfers and the regulation in the equilibrium level(Basu12).
Recommendations
The fiscal interventions can be considered to play a crucial role as an widespreadapproach in tackling the health nutrition process. The implementation of the fat tax must be done including the subsidy on the fatty products and items. Further, there should be a development of public awareness among the citizens linked with the ill consequences of consuming unhealthy food(Prabhakaran13). The public health awareness activities are likely to improve the nutrition knowledge of the citizens of India. With the imposition of this Fat Tax, there will be an improved level of accessibility to healthy food as well as promotion of health and nutrition in the workplace (Jørgensen14).
Conclusion
Thus, it can be said that the implementation of this Fat Tax across varied states in India will lower the burden of obesity. There should be an effective level of public awareness along with a Fat Tax to tackle the non-communicable diseases among the citizens. Therefore, Fat Tax is sure to shift the food choice of the consumers from unhealthy food to healthy food.
References
1. World Health Organisation. Obesity and Overweight.; 2020. Available from: https://www.who.int/news-room/fact-sheets/detail/obesity-and-overweight[Accessed 25 March 2021]
2. Krishnamoorthy Y, Ganesh K, Sakthivel M. Fat taxation in India: A critical appraisal of need, public health impact, and challenges in nationwide implementation. Health promotion perspectives. 2020;10(1):8.
3. Menon, S. Why has an Indian State imposed a “fat Tax”?.; 2016. Available from: https://www.bbc.com/news/world-asia-india-36771843 [Accessed 25 March 2021]
4. Commodity Profile of Edible Oil for April-2019. Estimates; 2019. Available from: https://agricoop.nic.in/sites/default/files/Edible%20oil%20Profile%205-4-2019.pdf [Accessed 25 March 2021]
5. Press Information Bureau. Nutritional Level; 2015. Available from: https://pib.gov.in/newsite/PrintRelease.aspx?relid=116953[Accessed 25 March 2021]
6. Kalra, A. Food, drink giants plot fightback as India looks to tighten rules; 2017. Available from: https://www.reuters.com/article/india-fastfood-modi-health-idINKBN16N0UG [Accessed 25 March 2021]
7. Misra, K. How a Fat Tax could work?; 2016. Available from: https://michiganross.umich.edu/rtia-articles/how-fat-tax-could-work[Accessed 25 March 2021]
8. Pandey, K. India records alarming increase of consumption of fats; 2014. Available from: https://www.downtoearth.org.in/news/india-records-alarming-increase-in-consumption-of-fat-47954Accessed 25 March 2021]
9. Kuriakose F, Iyer D. Tax Landscape and Public Health: A Critical Examination of'Fat Tax'in Kerala, India. India (November 18, 2016). 2016 Nov 18.
10. Downs SM, Marie Thow A, Ghosh-Jerath S, Leeder SR. Aligning food-processing policies to promote healthier fat consumption in India. Health promotion international. 2015 Sep 1;30(3):595-605.
11. Law C, Green R, Suneetha Kadiyala BS, Knai C, Brown KA, Dangour AD, Cornelsen L. Purchase trends of processed foods and beverages in urban India. Global food security. 2019 Dec 1;23:191
12. Basu S, Dahiya N, Bachani D. Sugar and fat taxes as means to halt obesity and prevent lifestyle diseases: Opportunities and challenges in the Indian context. International Journal of Noncommunicable Diseases. 2017 Apr 1;2(2):56.
13. Prabhakaran D, Jeemon P, Sharma M, Roth GA, Johnson C, Harikrishnan S, Gupta R, Pandian JD, Naik N, Roy A, Dhaliwal RS. The changing patterns of cardiovascular diseases and their risk factors in the states of India: the Global Burden of Disease Study 1990–2016. The Lancet Global Health. 2018 Dec 1;6(12):e1339-51.
14. Jørgensen T, Pisinger C, Toft U. Tax on saturated fat–does it work?. European journal of clinical nutrition. 2016 Aug;70(8):867-8.
