Tobacco provides direct and indirect employment to more than 45.7 million people, around 70% of whom are in the agricultural sector. Tobacco is a highly remunerative crop providing economic/social benefits to farmers in the tobacco growing regions.
ASSOCHAM study Tobacco Economics in India: The Voice of the Farmer and other Stakeholders found that the tobacco growing areas of the three major tobacco producing States in India, viz., Andhra Pradesh, Karnataka and Gujarat are better off in several socio-economic parameters as compared to the non-tobacco growing areas of these States. “…tobacco does create higher returns and other social capabilities for its farmers than those who are engaged in growing other cash crops,” the study report observed.
Studies conducted by the Central Tobacco Research Institute (CTRI), Rajahmundry, have shown that FCV tobacco is more remunerative than other crops grown in the region, and is difficult to substitute.
The performance of FCV tobacco has been impressive, particularly in terms of farmer earnings. Between 2001-02 and 2013-14, the gross earnings of FCV tobacco growers have increased more than six times.
| FCV Tobacco | 2001-02 | 2013-14 | Change |
|---|---|---|---|
| Production (Million Kgs) | 167.97 | 315.92 | 88% |
| Average Price (Rs/Kg) | 34.80 | 122.60 | 252% |
| Gross Returns (Rs Cr)* | 584.55 | 3873.19 | 563% |
Source: Tobacco Board (*Derived)
Since 2012-13 however, demand for FCV tobacco has reduced considerably leading to shrinkage in farmer earnings due to sharp decline in legal cigarette volumes on account of high taxes and growth of illegal cigarette trade.
From the 2013-14 levels, earnings of FCV tobacco farmers have dropped by more than Rs. 1500 crores in 2015-16. With reduced crop size and absence of a viable alternative crop, farmers’ earnings face further threat.