NEW DELHI: India has mooted the introduction of a designated “sin tax” to finance a part of the health budget during the 12th five year plan (2012-2017).

The 12th plan document, to be submitted to the National Development Council (NDC) presided over by Prime Minister Manmohan Singh , says “a sin tax can lead to reduced consumption of harmful items such as tobacco and alcohol and could be considered”.

The NDC will meet on December 27 to discuss the 12th plan.

The move is part of the health ministry’s larger plan to combat non-communicable diseases like cardiovascular diseases, diabetes , cancers and chronic respiratory diseases which are emerging as major killers.

The document for NDC says a package of policy interventions would be taken up which includes raising taxes on tobacco, enforcing ban on tobacco advertising in electronic media, counseling for quitting tobacco, early detection and effective control of high blood pressure and diabetes, screening for common and treatable cancers and salt reduction in processed foods.

The Philippines pushed through a similar sin tax this week to boost taxes on cigarettes and liquor.

Dr K Srinath Reddy from the Public Health Foundation of India said, “It can only work if the sin tax collected does not go into the general revenue pool. It’s a good idea and will lead to reduced consumption, specially among people with low disposable income, due to increased prices. The first budget of the National Rural Health Mission actually came from taxes from tobacco.”

Alcohol and tobacco are India’s giant killers. Around 275 million Indians consume tobacco which has 3,095 chemical components — 28 of which are proven carcinogens that can cause cancer . Around 2,500 people die every day due to tobacco related diseases in India.

On the other hand, alcohol consumption is connected to more than 60 diseases. Around 25% of road accidents in India are alcohol-related. India spends nearly $5 billion every year to manage the consequences of alcohol use, which is more than its total excise earning — $4.8 billion.

At present, at an average, Indians take their first sip of alcohol at the age of 19 compared to 28 in the 1990s. Nearly 62.5 million people in India drink alcohol with the per capita consumption being around four litres per adult per year.

According to the Planning Commission , general tax revenues would be the principle source of finance for publicly delivered health services supplemented by partnerships with the private sector and, contribution by corporates as a part of their corporate social responsibility.

The commission has pitched for earmarking a part of the proposed 2% CSR allocation by companies for funding public healthcare facilities.

The companies bill, passed by Lok Sabha this week, proposes that companies with a turnover of Rs 1,000 crore, net profit of Rs 5 crore or net worth of Rs 500 crore mandatorily spend 2% of their profits on CSR, while leaving it to companies to decide where they intend to spend the funds.

The commission has said that once the bill is passed by Parliament, all publicly-funded healthcare facilities would be allowed to receive donations and funding from companies under the CSR head.

According to the document, for financing the 12th plan, the projections envisage increasing total public funding, plan and non-plan, on core health from 1.04% of GDP in 2011–12 to 1.87% of GDP by the end of the 12th plan. In such an event, the funding in the central plan would increase to 3 times the 11th plan levels involving an annual increase by 34%.