The profitable strain: India (Himachal) needs green profits

With Colorado, an American state approving legalization of marijuana, a strong signal runs across the world that legalization is the only alternative to regulate the unchartered terrain of recreational pot.India (Himachal) needs green profits

The step can be instrumental in transforming the draconian age old NDPS act of 1985; legalization of marijuana is what Himachal (and India) also requires if it wants to smoke in the economic benefits of the “wonder weed.”

Himachal which is identified to produce over 60,000 kg of hashish and around 40,000 kg of opium illegally in more than 2,100 hectares of cultivable farmland and encroached forested area combined has a crystal-clear potential to excel in the cannabis trade.

An economy that is reeling under monstrous Rs 29 000 crore in debt and already taken a fresh loan of Rs 1100 crore through RBI must consider legalizing of marijuana for recreational purpose to pump in some funds.

Calculating on the basis of the figures mentioned in India today, more than 1,00,000 kg of hashish and opium is produced in the state annually. Going by the regular market rates of hybrid variety of opium and hashish in the grey market, they are sold at Rs 1.25 to Rs 1.35 lakh/kg in the state. Therefore, we come across more than Rs 1000 crore of illegal annual turnover at normal rates in the state that remains untaxed.

Nevertheless, the “high quality” produces from Kullu and Malana regions in particular, which are the leading producers (around 60% of the total produce), are sold at escalated rates in different parts of the country and abroad. Malana cream is sold around 1.5 lakh/kg.

Going by the sales trends in the state we can assume that even these regions follow same sales and distribution patterns. From the total produce, around 20% of the hashish reaches the metropolitan cities such as Delhi and Mumbai (sold at 3-4 times of local rates) and 10% reaches popular tourist spots such as Goa (sold at 4-6 times ) and about 10% is retained back by the local traders for sale in the state. In the international destinations such as Amsterdam, where atleast 10% must be surely exported as per rough estimates, the prices shoot up by 25 times.

While no less than 40 % must amount to personal use, carriage loss and destruction by the narcotics department; around 10% must be seized by the prohibition enforcement agencies annually as well although the observed figure is much lower and corresponds to 500 kg that is less than 1% of the total produce.

Therefore, it accounts for about more than 2000 crores (as per calculations) in markets outside Himachal that is roughly equal to the turnover in apple industry annually. Marijuana can therefore add more revenue to the state utilizing much less area for cultivation (apple cultivation is spread over 1 lakh hectares in area) without any substantial need of fertilizers and other agri-inputs.

GSDP of Himachal is estimated at 63,812 crore (at current prices as per the latest economic survey of the state) and the above calculated figure of revenue realization post marijuana legalization can add further 3% to the total. If we add service tax and sales tax on the sale of the finished products made out of the weed on the same terms as on alcohol and tobacco, the state’s economy can get benefitted significantly. In addition, the potential in narco-tourism raises further opportunities.

Marijuana can also be traded as a commodity on Futures and Options exchange. Marijuana can be traded similar to “vice stocks” such as of alcohol and tobacco which are recession proof too.

Not only legalization can control cannabis mafia, assist narcotic agencies to save their funds on enforcement of prohibition but illegal money exchanges operating in Dharamshala and Manali from where foreigners dealing in marijuana avail money to stay beyond their means in the limited budgets, can also be terminated.

However, post legalization, prices of marijuana can drop significantly and also lead to larger tobacco and agribusiness corporations taking over the marijuana market completely. This can hit small time farmers and traders badly. Hence, marijuana should always remain a state subject so that the joint keeps giving equal high to each and everyone.

Ashish Pandey

I am a business and finance journalist who is currently employed at Financial Express and previously at Zee News. My areas of interest include business and foreign policy. You can reach me on Twitter at @ashuvirgo1984 or @eFundsPlus.

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