MANTRAYA ANALYSIS#48: 24 SEPTEMBER 2020
SAMEER PAREKH
Abstract
Sale of cannabis is increasing globally, accompanied by legalization and decriminalization processes. North America and Europe are taking the lead. Asia is slowly catching up. When consumed moderately, Cannabis, like all other drugs, is recreationally and medically beneficial. In India, where cannabis has played a significant medicinal role for centuries, too is slowly waking upto the needs and benefits of decriminalizing and legalizing the drug. In the past years, several states, institutions and even agencies have initiated moves in this direction. However, the country needs to put a system in place to deal with the unintended pitfalls of making the drug available legally. Its potential medical benefits, commercial viability and awareness among people need to be factored into a comprehensive national policy, which needs to begin with a serious national debate over the issue.
(Photo Courtesy: QZ.com)
Cannabis Usage
New Frontier Data 2018-2019 (NFD) report estimated both legal and illicit global cannabis sales to be US$356 billion in 2019; while the global legal cannabis market is expected to cross US$100 billion only in 2024, even after including the budding US$60 billion international medicinal-cannabis demand, increasing number of states /countries considering legalization or market reform, and development of new cannabis consumer product markets. NFD also found that in mature legalized markets consumers use cannabis in more lifestyle /wellness-specific ways against strict medical or recreational usage.
More than twenty-five countries including developed nations like Canada, Holland, Australia, Germany, Austria, Switzerland, New-Zealand, Norway, England, and forty-seven states in US have initiated legalization process in one form or another. Another sixty countries are investigating cannabis usage. Twenty-eight European countries have some form of cannabis programme, while four Indian states currently allow medical cannabis again (until 1985 cannabis was sold legally widely in India). However, the global rollout of adult-use cannabis is slower and more uncertain than the momentum behind medical-use programmes. North-America currently dominates the medical-cannabis market, with 2.2 million medicinal users due to the appeal of cannabis products, and recent legalization in Canada and most US states; the largest numbers of cannabis cultivation sites evolved after the UN Drug Committee Declaration on the effectiveness and relative safety of cannabis. While top nine cannabis firms by market cap are North-American, the European market (lifetime adolescent cannabis usage ranges from 37 percent in Czech Republic, 31 percent in France to seven percent in Sweden and Norway) will grow at a significantly faster rate over the next five years.
Asia: Regional Cannabis Perspective and Impact
In 2018, Thailand became the first country in Southeast-Asia to approve the use of cannabis for medical purpose. Since then, Philippines, South Korea, Japan, Guam, Malaysia and some provinces of India and China have brought similar cannabis reforms. A continuation of this trend may see Asia becoming the third largest global market for cannabis due to increasing number of chronic pain patients, growing clinical need for managing the increasing patient population and increased prevalence of Alzheimer’s disease.
The regional context becomes more important given India’s proximity to both the Golden Triangle and Golden Crescent, with the latter being the primary cannabis source for India since the 1980s. India has endured the menace of drug trafficking for four decades with six percent of global herbal cannabis seizures (International Narcotics Control Board), is a significant drug-smuggling hub, and has one of the greatest illicit cannabis cultivation and production internationally. The nexus between illegal drug-traffickers, criminal networks and non-state actors adds to the conflict dimensions. Drug-traffickers use the same international border-breaches for weapon and terrorist smuggling; sale of illegal cannabis is said to have financed terrorism both in Kashmir and Northeast.
Indian Cannabis Debate
India is no stranger to cannabis. Cannabis was grown and used in India at least since 2000 BC and is listed as one of the five ‘essential plants’ which supposedly offer numerous health benefits. Indians continued cannabis use well into the colonial rule and post-independence India. In 1985, the NDPS Act made cannabis illegal for the first time in Indian history. However, that has not prevented rampant use of Cannabis. New Delhi and Mumbai rank third and sixth, respectively, globally in the number of users. The first national survey conducted by National Drug Dependence Treatment Centre established that in 2018 2.83% (31 million) Indians were current cannabis-users (2000 UNODC report showed 3.2% cannabis prevalence of usage) while another study reported that 7.2 million Indians consumed cannabis annually.
Indian lawmakers are being lobbied to legalize or at-least decriminalize cannabis by organizations like “The Great Legalization Movement India” to allow access to the $1 trillion market. Despite the counter-lobby by alcohol and tobacco producers, there are indications that the current Indian regime is favourable to affecting a policy change. Media framing and decline in cannabis-risk perception, overall punitiveness, and importantly distinct ‘religious’ dimensions are behind an attitudinal change. Incidentally, a significant number of developments towards legalizing Cannabis have been observed in the recent past, all in states ruled by the Bharatiya Janata Party (BJP). Uttarakhand was the first one having granted licence to the non-profit Indian Industrial Hemp Association to grow the fibre over 1,000 hectares, on a pilot basis. Both Manipur and Madhya-Pradesh are considering medical cannabis legalization. In February 2018, the Prime Minister’s Office, sent a letter to the MHFW to examine potential medical benefits of Cannabis. While the MHFW’s advice is not in public domain, the government has allowed cannabis or hemp product sale on general ecommerce sites and has granted, in September 2018, the first license to grow hemp.
In November 2018, the Central Council for Research in Ayurvedic Sciences, Gujarat Ayurved University and Tata Memorial Hospital concluded during the first clinical study as a restorative drug, that cannabis is effective in alleviating pain in cancer patients, post-chemo and radiotherapy. In November 2018, a private company BOHECO and CSIR co-hosted a conference to promote the use of cannabis-based medicines attended by PMO’s Minister of State and MPs. In July 2019, the Delhi High Court heard a petition challenging the ban, and grouping cannabis with chemical drugs under NDPS. In September 2019, the government allowed cannabis research for the first time. The CSIR is researching cannabis effectiveness for cancer, epilepsy, sickle cell anemia and even surgery. In February 2020, first Indian medical cannabis clinic started selling infused tablets and oils. The Narcotics Control Bureau has sanctioned research projects to examine substances in cannabis and grow in a monitored way at CIMAP.
Legalisation vs Criminalisation
Similar to other illicit drugs, use of Cannabis indeed cause addiction and may increase crime, incidents of accident and death. However, studies indeed prove that cannabis-use public health burden is lower than that of alcohol, tobacco and other illicit drugs. Far ranging medical benefits outweigh the dangers associated with what the cynics believe will result in a boost to unrestricted use of the drug. Development and implementation of effective and efficient Pigouvian-taxation system (not sin-tax) compensates for the social cost and ensures controlled usage. Simultaneously, patient access, public education, age-restrictions, indigenous investor and board-member involvement policies may eliminate other concerns. Thailand is a good example.
Experience of other countries tell us that cannabis production can provide jobs, reduce welfare dependence and income earned by organized crime. Its legalization will decrease black marketers’ gains in cannabis sales and trafficking, and further help improve occupational health and safety, environmental safety, regulated use of insecticide and efficient energy use.
Insufficient Indian data collected hinders benefit assessment; however due to multiple medical, legal and regulatory (right to medicine particularly for doctors, eco-friendliness, farmer empowerment) similarities to the US, American statistics could be used as a proxy. 90,000 Americans die annually from alcohol and tobacco while cannabis is neither toxic nor lethal. Legalization in the US (prohibition replaced with taxation and regulation) is projected to result in an annual US$8 billion expenditure saving (California alone saved US$1 billion from 1976 to 1988) and US$6 billion tax revenues. Decriminalization will decrease the prison population and save government money spent on enforcing cannabis laws. In 2006, US cannabis production at US$35.8 billion was more than corn and wheat put together (cannabis is the top cash crop in 12 states, one of the top three cash crops in 30 states, and one of the top five cash crops in 39 states) while eradication efforts failed cannabis production which increased tenfold in 25 years.
Need for a National Debate
Cannabis’ international trade will become a global reality when approved by WHO for medicinal purposes, removed by UN from the opium category, and legalized federally by US and every state in every country. Canada and Holland have authorized export while Israel. Mexico, Australia, Germany, Austria, and Uruguay are considering trade agreements and overseas shipments. India needs to develop a comprehensive cannabis strategy considering global cannabis legalization experiences. A lot will have to be done prior to any such decision in terms of developing coherent and reasonably consistent national policy covering registration, regulatory compliance, and permit application by existing growers and suppliers of medical cannabis including non-profit dispensaries legally providing medical cannabis. There has to be a transparent, reasonable, and fair approval and redressal process accompanied by a comprehensive direct and indirect tax regime; clarification on debt or equity financing; curb on illegal activity to protect legal cannabis business particularly in rural areas; sufficient and widespread detoxification centres; national regulatory and research agencies with adequate number of pan-India offices. The first step, however, will have to be a national debate, given the far-reaching implications of the decision.
(Sameer Parekh is a CA with over 25 years of experience in providing assurance, accounting, consulting and advisory services. He has attained extensive experience in a variety of businesses engaged in pharmaceutical, retail and manufacturing sectors, specifically cannabis companies with a North American focus. This analysis has been published under the ‘Organized Crime and Illicit Trafficking’ project. All Mantraya publications are peer-reviewed.)
