Addressing the elephant in the room: A cost-benefit analysis of the legalisation of Cannabis in India
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Introduction
Cannabis consumption in India has had a long history, from being consumed in prehistoric times as instructed in Ayurveda to its significance in ancient Indian culture, to being criminalized in the late 20th century. Although illegal, even today, it remains one of the most consumed substances in the country. Since the status of cannabis in India is clearly not able to curb its consumption and achieve the government’s goals, in this paper, we explore a situation of possible legalization of cannabis in India, characterized by certain restrictions and regulations. Through a doctrinal- approach, the study seeks to provide an in-depth analysis of the consequences of the legalization of recreational cannabis.
Cannabis is among the most consumed, cultivated, and trafficked drugs. According to the government of India’s data, 31 million people in India, i.e 2.8 percent of its population consume cannabis in some form1. This is just the official survey data, with the ground reality being even higher. Two Indian cities - Delhi and Mumbai are among the top ten cities worldwide in terms of consumption of cannabis. Despite its large-scale consumption and deep-rooted history in India, there is an ongoing debate around the legalization of cannabis in India.
Cannabis, commonly known as Marijuana, is a plant whose dried leaves and seeds are used for medicinal and recreational purposes. This plant is known by many names, such as weed, ganja, hemp etc. The consumption of cannabis dates back centuries and is a large part of Indian culture and the Hindu religion. Cannabis has been mentioned in ancient scriptures like the ‘Atharva Veda’, which dates to 2000-1400 BC.
The Narcotic Drugs and Psychotropic Substances (NDPS) Act, 1985, restricts people from
consuming cannabis or any of its byproducts. The laws also make the possession of cannabis
flowers and buds along with their byproducts, illegal. As per the NDPS Act, 1985, cannabis is defined in Section 2 (iii) of the act. According to this section cannabis (hemp) is defined as: “(a) Charas - a separated resin, in whatever form, whether crude or purified; obtained from the cannabis plant, which also includes the concentrated preparation and resin known as hashish oil or liquid hashish; (b) ganja - the flowering or fruiting tops of the cannabis plant, (excluding the seeds and leaves when not accompanied by the tops), by whatever name they may be known or designated; and (c) any mixture, with or without any natural material, of any of the above forms of cannabis or any drink prepared therefrom.”
Due to the ineffectiveness of the current system of prohibition in India, the issue surrounding
legalizing and decriminalizing marijuana should be paid attention to. Decriminalization of
cannabis means that the personal use of the substance remains illegal and can lead to a small legal fine, but is no longer classified as a criminal offense. On the other hand, legalization means that cannabis would be legally available. This legislation will have similar characteristics such as products like tobacco and alcohol, allowing the government to regulate its uses.
History of Cannabis in India
The Himalayan region of India is renowned for the wild edible plants found there which have
medicinal capabilities. Due to the harshness of climate, the locals of the mountain range must
resort to using wild plants as food, timber, fuel, medicine, fodder, etc. Similarly, Cannabis Sativa has a long-rooted history in the culture of India for its varied usages. It has been used both medicinally and for religious reasons.
Cannabis is called Vijaya in Sanskrit and bhaang in Hindi. It was first popularized by Hindu saints, who prescribe its usage for many ailments such as for cuts, burns, and blisters, for menstrual pain, for asthma, for insomnia, for ease in childbirth, and for clearing of phlegm. In the Atharva Veda, cannabis finds a mention as a ‘sacred plant’ among other plants such as soma, darbhi and barley.
The usage of cannabis is deeply embedded in the ancient culture of India. There are different
indigenous uses of the different parts of cannabis such as the seed, seed oil, fiber, stems, leaves, inflorescences, and resin. According to Hindu mythology, it is believed that a single drop of amrit or sacred nectar fell on to the ground, and where it fell was the place where the first cannabis plant sprouted.
Consumption of cannabis for recreational and sedative purposes has also been attributed to the Shaivite sect of Hinduism, as Shiva himself is said to have been a user of Cannabis. However, this type of usage is more ritual and religion oriented, with the act itself being highly meticulous and ritualistic, and the usage is said to demonstrate profound respect for the plant.
As the British colonized India, they found the extensive usage of cannabis in rural India very concerning and set-up a large-scale study5 about the same. 1000 standardized interviews were
conducted all over India and these interviews sampled a diverse array of populations, spanning across different economic strata and different regions of the country. Years later, the Indian Hemp Drugs Commission Report produced the report in 6 volumes of data, with the conclusion that a ban or any sort of suppression of cannabis usage would be unjustified as the usage has religious sanction since a long period of time6. Also, since the usage is so prevalent and embedded in religion, the prohibition would not deter usage but rather only promote the usage of more dangerous narcotics. There was also a concern about outrage of religious clerics. In the 20th century, as the US expanded its goal of drug prohibition internationally and worked with the UN to establish a prohibitionist drug policy all over the world. It has frequently been argued that the 1961 UN Convention on Narcotic Drugs was the consequence of a resolution supported by the US and US policy that served its own interests. International agreements to control the trafficking, cultivation, usage, and other aspects of narcotic substances, including cannabis, were made in 1961. In order to fulfil its commitments under both this Convention and the 1971 Convention on Psychotropic Substances, India established the NDPS Act. As a result, in 1985, the use of cannabis, which had been accepted on both a legal and social level for thousands of years, was made illegal.
Cost Benefit Analysis
Cost Benefit Analysis a microeconomic tool that assesses the costs and benefits of policies across many spheres. Government policies are analyzed through this method before their implementation. Since different individuals can have different responses to the same policy, and the same policy can benefit some while adding cost to others, the assessment is made as per ‘net’ gains and losses.
These net results are reported as a ‘net social benefit’. To proceed with this analysis, it is firstly important to identify all the tangible as well as intangible costs and benefits that can occur due to the legalization of recreational cannabis.
1. Taxation
The most appealing argument in favor of legalization of Cannabis is the increased tax revenue that it would bring to the Indian economy. Legalizing provides an important advantage over prohibition because it allows for the Government to collect taxes from the legalized drug. The high demand for recreational Cannabis in India provides a certain guarantee that legalization of the drug would yield significant tax revenue. Due to the expectedly low prices of cannabis pre taxation, the government will also get a space to impose higher taxes while still being able to maintain competitive prices.
An interesting model for taxation in the case of cannabis can be seen in Colorado, USA, where a portion of the tax proceeds is put into the state’s public school capital construction assistance fund, and public programs such as substance abuse and regulation of marijuana use. This helps ensure that any adverse effects caused by legalization is countered by the tax revenue generated.
The legalization of recreational cannabis in India could generate substantial tax revenue due to the presence of a significant black market for Cannabis as the third most consumed substance nationwide, behind only tobacco and alcohol. As the world, cannabis market projects to go up to $15.8 billion by 2027. Indian law acts as a barrier to this economic growth opportunity. A study estimated that around 725 crores could be raised in Delhi alone if cannabis is taxed, while the same for Mumbai is 641 crore.
2. Criminal Justice System
The benefits include:
2.1 Incarceration rate
In 2018, 81,778 persons were arrested under the NDPS Act. 59% of those were for mere
possession for personal use8 10,669 cases from Magistrate Courts in Mumbai, 99.9% of
these cases involved the consumption of a narcotic substance. Wherever information on
the kind of substance involved was available, 87% of the cases involved cannabis.
Mumbai has the highest rate of arrests in the country relating to drugs. The maximum
number of cases across the country that result in incarceration is for possession or usage
and not for any crime committed under the influence or similar situations.
Thus it can be seen that the criminalisation of cannabis consumption is pushing individuals into the criminal justice system. To arrest, prosecute and sentence a cannabis consumer, the
state machinery exhausts substantial human and economic resources. These individuals act
as a burden on an already overburdened and understaffed justice system of India, which is
maintained by the taxpayers’ income. If cannabis is legalized, it will be a relief to the justice
system, which is characterized by a backlog of cases and overpopulated prisons. The
money thus saved could be used for reforms for individuals who have committed more
severe crimes than just possession.
It is also required to note that imprisonment is not just a burden on the criminal justice system i.e., the courts and jails, but also for the individual. Criminal records are accompanied by loss of revenue for the person thus jailed, along with affecting their social and physical well-being. Furthermore, those who are most often incarcerated for possession belong to the marginalized sections of our Indian society, such as daily wage workers. This process broadens the already wide divide between the ‘haves’ and ‘have nots’.
2.2 Black Market
The high demand for cannabis in India has resulted in the expansion of the black market
and puts the power in the hands of illegal drug dealers to be the sole providers of the product
with no accountability. By taking control of the distribution of cannabis, legalization would
reduce the flourishing black market for the drug, which is the cause of a large amount of
illegal activity in India, as indicated by the rate of police-reported cannabis offenses.
Legalization can address some of the social problems associated with the black market for
marijuana, such as unsafe environments created by the illegal distribution of the drug.
The costs include:
2.3 Regulatory enforcement costs
If legalized, the criminal justice costs would include the enforcement of regulations,
offences of underage use and supply, licensing costs, and measures against the black
market supply. Costs would be incurred to ensure that individuals below the permitted age
are not consuming drugs which would require vigilance and intense patrolling protocols.
Along with this, since the sale would be legalized, individuals getting into this business
would require to obtain a license, for which their background, authenticity and product's
ethicality would have to be verified. Costs would also be incurred to check the quality of
the product, whether it meets the safety standards and whether proper protocols were
followed during the manufacturing and cultivation process. The cost would also be incurred
to dismantle or diminish the existing black market supply.
2.4 Increase in crime under the influence
Availability of legal cannabis might also result in an increase in crimes under the influence
of the drug, which is a social cost that society at large would have to bear. Such crimes
include driving under the influence, nuisance, theft etc.
3. Labour
3.1 Positive labour externality
The legalization of cannabis, to the extent it reduces the criminal convictions within India,
can result in a significant labour externality. To the extent that, a person charged for
possession is imprisoned in many instances, upon which they lose out on employment
opportunities or completing their education. Legalization would result in fewer people
acquiring a criminal record, and the increase in income earned by these individuals will be
a net gain.
3.2 Employment opportunity for labour
With the legalization of recreational cannabis, there will be an increase in its production.
There will be agricultural sector expansion. Private players would also enter the market,
establishing various brands around the same. Legalization would encourage cannabis to
grow operations to expand, this would require infrastructure, technology and manpower.
There will be a generation of jobs such as those who work at the farms, conducting product
surveys, employees for brands associated with cannabis products, forest management, etc.
3.3 Negative Labor externality
While legalization may produce positive labour externalities, it might also result in a loss
of labour income. The reason for the same can be due to the effects of cannabis, such as
reduced productivity, and health problems which may lower worker productivity and
willingness. This will eventually force such consumers to take lower-paying jobs.
4. Private sector
4.1 Changes in net profits of private firms
If we consider sellers of cannabis as private firms, then any net profit or loss that is
accumulated would be a gain or a loss of the private sector. We can conclude that with
legalization, there will be a net increase in profits for private legal firms and a net decrease
in profits for private illegal firms.4.2 Change in profits of a substitute and complementary products
The legalization of cannabis will lead to the integration and expansion of the cannabis
market, which will have an adverse effect on its substitute and complementary industries.
There is a substantial amount of research with regard to the question of whether alcohol
and cannabis are substitutes or complements. The nature of the relation between both
products is extremely important as it determines the demand curve for alcohol upon the
legalization of cannabis. As legalization would cause a rise in demand for cannabis, if
alcohol is a substitute, then its demand curve would face an inwards shift. If alcohol is a
complement to cannabis, then the demand curve would face an outwards shift. However,
there is great debate regarding this, and the results are hypothetical at best.
Cannabis is found to be a complement to tobacco, hence tobacco demand will also increase
with legalization.
5. Health
There are a range of costs and benefits with respect to health that arises upon the legalization of recreational cannabis.
The costs include:
6.1. Ensuring higher quality of the product.
A primary argument for the decriminalization of cannabis is the immense harm caused by
the selling of cannabis of unregulated quality. This uncertainty regarding the contents and
quality of cannabis, as well as the immense harm due to the consumption of cannabis that
is mixed with other ingredients, is a great social cost that is to be deterred with
decriminalization. Hence, to deter this cost, the regulation of cannabis products must be
ensured. This will require enforcement structure and government expenditure, and hence
is a cost that must be factored in.
6.2 Rehabilitation
Decriminalization will cause the social risk of cannabis consumption to go down and hence
increase the demand. With an increased number of consumers, it is entirely plausible that
society will face an increased number of cannabis addicts. The government will be required
to build rehabilitation structures for the accommodation of these individuals in society.
Hence, this is also a cost that must be factored in.
6.3 Health risks from cannabis smoking
Marijuana has certain adverse effects on a person's health. While there is a lack of
conclusive research on the health risks, there is strong evidence which suggests a high
correlation between the consumption of marijuana and the following ailments:
6.3.1 Addiction
According to the 2012 National Survey on Drug Use and Health10, an estimated 2.7 million
people 12 years of age and older met the DSM-IV criteria for dependence on marijuana.
Cannabis withdrawal syndrome11 also has been recognised, and it includes irritability,
sleeping difficulties, dysphoria, cravings, and anxiety.
6.3.2 Effect on brain development
There is a proven negative effect of cannabis usage on the functional connectivity of the
brain if the consumption of cannabis starts in adolescence or puberty. The effects include
a decline in IQ and impaired neural connectivity.
6.3.3 Mental Illness
Regular cannabis consumption has a high correlation with an increased risk of anxiety and
depression, though there is a lack of determining a casualty in this case. Cannabis usage is also linked with psychoses such as those associated with schizophrenia, especially if the
required diathesis exists.
6.3.4 Lung cancer and other breathing ailments
Consumption of cannabis by the way of smoking has a high correlation with cancer.
Marijuana smoking also has been seen to cause bronchitis, inflammation of airways in the
lungs, and myocardial infarction.
6.4 Health benefits due to cannabis consumption
While only a few benefits have been conclusively proven, there are potential and highly
correlated effects of cannabis consumption that are found15. The known (with substantial
evidence) effects include
v Pain-relief,
v Treatment of anorexia nervosa,
v Enhancement of appetite in HIV and cancer,
v Relief from nausea, and
v Reduction in seizures caused by epilepsy.
v The possible effects include
v Reduction in opioid withdrawal syndrome,
v Treatment of glaucoma.
Other benefits such as recreation through cannabis may also be listed.
Case Study: Legalization of cannabis in Canada
Cannabis is one of the most widely used substances in Canada with nearly half of Canadians
reporting having used it at some time in their lives. In the year, 2018, the government of Canada, through the Cannabis Act, legalized the production, distribution, sale, import and export, and possession of cannabis for adults of age 18 and above. This made Canada the second country to legalize the recreational use of the drug. Some of the goals of this act, introduced by Prime Minister Justin Trudeau's government, were to keep the usage of drugs outside the hands of youth, to take away profits from criminals, to protect public health by imposing strict product safety and product quality requirements, and to reduce the burden on the criminal justice system in relation to cannabis. Another feature of this act was that it allowed provinces and territories to put up restrictions of their own.
Since legalization, there have been certain changes in the consumption pattern of Cannabis in
Canada. According to the survey conducted by the government of Canada in 2020, 27 per cent of participants reported having used marijuana from the 2019-2020 period, an increase from 22 per cent in the first cannabis survey conducted in 2017. As consumption increased, so did the sales. Retail sales in 2020 were roughly over $2.6 billion, which represented a 120 per cent increase compared to 2019. Total recreational and medical sales between 2018 and 2021 are estimated to be $11 billion in Canada overall, two-thirds (67.8%) of which were for recreational cannabis.
While the data suggests that cannabis consumption has gone up, criminal convictions for cannabis-related crimes among youth have dropped dramatically. A primary goal of this legislation was to prevent cannabis use and associated harms among youth, the data provides initial evidence supporting this goal. Immediately after cannabis legalization, police-reported criminal incidents among male and female youth for cannabis-related crimes dropped significantly by 55 to 65 percent. According to data, more than 70% of the marijuana-related arrests in Canada were simply for possession. The legalization of marijuana now gives police officers more bandwidth to spend their time searching for and arresting more serious crimes.
According to the National Cannabis Survey conducted in 2019, an estimated 29.4% of cannabis
users reported obtaining all of the cannabis they consumed from a legal source; nearly three times higher than before legalization (10.7%). Many consumers obtained cannabis from multiple sources. When all those who reported getting at least some of their cannabis from a legal source are combined, the percentage of consumers accessing (at least some) cannabis legally increased to 52.0% in 2019. Thus, showing positive signs of achieving its goal of eventually eliminating the illicit Canadian cannabis market.
Further, the Legalization of Cannabis has resulted in the emergence of a multibillion-dollar
industry, new jobs and tax revenue in Canada. When the direct, indirect and induced economic
activities from this industry is taken into account, it has been estimated that it has provided a $43.5-billion boost for Canada’s GDP between 2018-2021. It has also provided 151,000 jobs.
Approximately, $25.2 billion of the amount has been a result of direct labor income. As of 2021, for every dollar of revenue, the industry adds approximately $1.09 to Canada’s GDP. The sector has also provided significant government tax revenue since legalization, particularly indirect tax revenue, which amounts to approximately $15.1 billion.
Many of the concerns around legalized cannabis , such as potential increased cases of cannabis-
induced psychosis and schizophrenia, and driving under the influence of drugs, have not
materialized when it comes to Canada. A recent report from Mothers Against Drunk Driving
Canada says the number of drug-impaired driving charges is "extremely low" — accounting for just 11 per cent of the 5,506 impaired driving charges across Canada in 2019.
Post legalization, the environmental impact of the sector has also shown a positive inclination. The illicit cannabis market posed serious environmental concerns. They were characterized by usage of banned pesticides and insecticides, and other chemicals which had negative health implications and posed threat to the environment. Since legalization, this scenario has changed. However, the industry still contributes to land degradation, water diversion, and excess nutrient runoff that can contaminate habitats or create potential ozone risks. It also significantly emits greenhouse gasses. It is also important to note that despite continuous efforts, the Canadian government has not been very successful in completely combating the illicit market, taxation policy, consumer education and awareness, and financial viability in relation to cannabis. There also is a lack of available data on the potential public health impacts of the growing cannabis sector in Canada.
Conclusion and Recommendations
From the given case study as well as the analysis of the costs and benefits, a case has been presented for the legalization of cannabis, given the strong connection it has with our culture and the benefits it would provide to society, along with the unproven status of the health risks. With the legalization, there must be regulation to ensure the following:
v Strict enforcement of the legal age of obtaining cannabis.
v Systemic breakdown of the black market and regulation on the quality of products.
v Enforcement of a legal limit of cannabis that an individual can obtain for personal
v recreational purposes.
In the present scenario, with cannabis criminalized, there is rampant consumption of it and
subsequent dangers with the same. Therefore the following recommendations are presented for the status quo scenario:
v Building more rehabilitation centres.
v Systemic breakdown of the black market with ground-level action.
v Increased punishment/fine for offenders to deter from usage.
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