This study is based both on secondaryand primary data. The primary data were collected using asmoking behavior survey and a purposive sample survey amongtobacco-cultivating farmers. The overall smoking prevalencein Nepal for the population aged 15 or more is estimated at37.4%, and is higher (47.4%) among males than among females(27.6%). Poor people are more likely to consume tobacco thantheir better-off counterparts, resulting in increased healthhazards and the diversion of scarce income. The tobaccoindustry is a lucrative business for the private sector andgovernment; the private sector makes large profits, and thetax revenue is substantial. Economic analysis estimated theprice elasticity of demand for cigarettes and bidi at-0.882. It is found also that the poor and the young are thegroups most sensitive to price changes. Therefore,considering health and economic benefits and povertyalleviation goals, a policy of real price increase throughtaxation of all types of tobacco product would be adesirable public policy for the government of Nepal to consider.
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