Why India must hail Kerala's 'fat tax'

Kerala’s finance minister TM Thomas Issac presented the maiden Budget of the Pinarayi Vijayan-led Left Front government of Kerala on Friday (July 8).

Among various proposals and taxes announced to shore up the revenues of the cash-strapped state reeling under a phased liquor ban, a "fat tax" of 14.5 per cent was announced on food articles like burgers, pizzas, pasta, doughnuts and sandwiches sold at quick delivery chains and other branded restaurants.

While it is a first in India, similar fat taxes are levied in many Western and South American countries with varying degrees of success.

What does the fat tax aim to achieve?

On the face of it, it seems like an attempt to regulate the junk food habits of the younger generation in the state. But the fact that there are few such outlets in Kerala, despite being the second most urbanised state in the country, makes one wonder if it would really make much of a difference.

Moreover, even the Budget estimates just a gain of ten crore emanating from the said proposal.

So, more than the health benefits that could accrue, this might be a desperate attempt to raise tax revenues that had gone down by an average of four per cent in the five years of UDF rule, owing to the crisis in the agricultural sector and the layoffs in Gulf countries that stifled the purchasing power of people.

In layman’s terms, the "fat tax" would raise the cost of a medium chicken pizza from rupees 350 to 400. It may not affect more than 90 per cent of Keralites as people in the state are spoilt for choice when it comes to eating out.

But recent studies have pointed out that a high percentage of adolescent population in urban areas who happen to be the patrons of these fast food chains are overweight or obese, and this would have to be checked sooner than later.

While the "fat tax" seems to have been imposed without proper planning in the absence of sugary carbonated drinks and other packaged foods being taxed, this could be a good beginning.

One glance at statistics would help us put this into context.

A study published in the medical journal Lancet in 2014 says that India is only behind the United States of America and China in the global hazard list of top ten countries with the highest number of obese people.

Moreover, Kerala happens to be home to the second largest population of obese people in India behind Punjab, and just ahead of Delhi with 17.8 per cent of men and 28.1 per cent of women reporting a Body Mass Index (BMI) above 25.

While some people might argue about the impact created by this step in the short term, there is no doubt that regular intake of junk food results in obesity, diabetes and even cardiovascular diseases as various studies have shown.

In 2014, at the opening of the World Health Organisation’s annual summit, United Nations special rapporteur on the right to food, Olivier De Schutter, said, "Obsesity is a bigger global threat than tobacco. And it is not being taken as seriously as it should be."

In fact, the WHO had proposed that nations should consider taxing junk foods to enable people to make healthier choices even as far back as 2003. According to a report by The Mckinsey Global Institute, the global cost of obesity is almost $2 trillion now - on par with the global cost of smoking and armed violence.

While the imposition of a "fat tax” in Denmark for products with more than 2.3 per cent saturated fat at the end of 2011 was unsuccessful as it was scrapped after a year, experts point out that it did not succeed because the levy was seen as a revenue mopping exercise and not from a public health viewpoint.

Even in Denmark, the consumption of junk food had come down in that period which vindicates the concept.

It has been more successfully employed in countries like Mexico, Hungary and some 33 states in the US. The results from Mexico are encouraging as they have shown a fall of 12 per cent in the consumption of sugary carbonated drinks, and five per cent in calorie-rich junk food since they introduced it in 2014.

Devinder Sharma, well-known food and trade policy analyst, opined that this levy of a "fat tax" is a welcome move while speaking to this writer. But he went on to say that sugar-sweetened beverages and white sugar must also be targeted in the coming years to make it more holistic.

Nutritionists have observed that this step must to be followed up by incentivising healthy alternatives. Kerala happens to have one of the lowest per capita consumption of fruits and vegetables according to the national sample survey despite high living standards.

It remains to be seen if more states pick up this idea in the coming days and if Kerala itself continues with this experiment in the next Budget and takes it to the next level. The initial signs are encouraging as people seem to be accepting of it.

Thomas Issac, who is not only a trained economist but someone who is outspoken on environmental and ecological issues, has reiterated his commitment to take this forward on the lines of his "Green Budget" in 2010.

It seems, "fat tax" as an idea is here to stay.