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Will taxing fat Indians cut obesity?

Kerala’s hoteliers feel a tax on fast foods will discourage foreign multinational investment in the southern Indian state. (Photo by Kiran Sharma)

NEW DELHI -- Kerala in southern India has become the first state in the country to announce a 'fat tax' on pizzas, burgers, sandwiches, and other fast foods served by foreign restaurant chains, such as McDonald's, KFC, and Domino's Pizza.

Ostensibly, the aim is to encourage healthy eating habits among people through consumption of traditional and freshly cooked food, and to control obesity.

Kerala has the second highest incidence of obesity in India after Punjab in the north. About 28% women and 18% men there are officially classified as either overweight or obese, while for Punjab the figure is 30% and 22%, respectively.  

The rapid rise in the number of obese people, especially children, has triggered official concern. T.M. Thomas Isaac, Kerala's finance minister, this month announced a fat tax of 14.5% on burgers, pizzas, tacos, donuts, sandwiches, pastas, bread fillings, and more, sold by branded restaurants. Isaac said there would be additional annual revenue of 100 million rupees ($1.48 million) when he presented the state budget.

Kerala is a major tourist hub blessed with serene beaches, lush green hill stations, and sprawling plantations. A phased ban on the sale and consumption of alcohol in hundreds of bars across the state began in 2014 to discourage excessive consumption.

Kerala, home to over 34 million of India's 1.25 billion people, had the highest per capita alcohol consumption level at 8.3 litres per person annually. The national average is four litres. The prohibition policy, which has restricted alcohol sales to big hotels, was upheld by India's supreme court in December 2015 after bar owners made a legal challenge. Recent reports in local media suggest the state government may have to review the ban, which has damaged tourism.

Mixed response

Amit Khurana, head of the food safety and toxins program at the New Delhi-based Centre for Science and Environment, is one of those who feels the Kerala initiative is a move in the right direction.

"Obesity in the younger generation has been an issue, and limiting the consumption by making it expensive is one of the recommended ways globally," he told the Nikkei Asian Review. "What is most important here is that this money should actually go to promote good food in schools and colleges, such as food that is not ultra-processed, and that is freshly cooked, and non-packaged."

Others view it as simply another move against foreign multinational companies (MNCs).

"The whole focus of the government is only on the MNCs, actually," says Rajesh N. Shetty, the distribution director of Yum! Restaurants India, which operates KFC, Pizza Hut, and Taco Bell. Shetty pointed to the many local restaurants and hotels in Kerala that are not subject to the new tax regime.  

"The quality standards that we follow are pretty stringent," said Shetty. "I am not sure why the government is pushing this tax -- this is not going to help, and is just one way of discouraging MNCs from investing."

Moideenkutty Haji, president of the Kerala Hotel and Restaurant Association, agrees that the fat tax is "not a good idea".

"It may affect the sale of fast food and lead to customer withdrawal," he said. It is not practical for the hotel industry."

Some mothers have hailed the initiative, and want more stringent action. Kerala's Poornima Appukuttan has a son of 12 and says the state government made the right first step. "It is not enough, though," she said. "We see so many vendors selling deep fried snacks on roadsides and small shops -- these foods too are harmful."

Aparna Lall, a New Delhi mother with a 5-year-old daughter says the initiative is good but impractical. In India, the world's fastest growing major economy, she believes middle-class purchasing power will outpace the new taxes -- modern Indians can afford to stay fat. There is a need to "sensitize children and inculcate good eating habits", said Lall. "Schools should strictly monitor canteen menus."

India not the only one

Obesity, which can lead to diseases like diabetes, has had taxation effects in other countries. Denmark started taxing foods high in saturated fats in 2011, but gave up after a year. People simply procured the products more cheaply from other European countries. Hungary in 2011 taxed foods containing unhealthy levels of sugar, salt, and other potentially harmful ingredients. Four years on there, some $219 million in revenue has been earmarked for health spending, according to a World Health Organization report. 

In March, Britain's former finance minister, George Osborne, announced a tax on sugary drinks, including Coca-Cola and Pepsi, following concerns over obese children. Osborne said it would be introduced after two years "to give companies plenty of space to change their product mix". Last month, Philadelphia in the US, also approved taxing fizzy drinks. 

More broadly in India, the government has been promoting health awareness and advocating changes to lifestyle and diet to combat diabetes in particular. Citing International Diabetes Federation estimates, Health Minister J.P. Nadda recently said the number of adults with diabetes increased from 65 million in 2013 to over 69 million in just two two years.

Other states may soon be joining Kerala in its war on fat. 

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