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.
|Production (Mln. Kg)||167.97||315.92||88%|
|Average Price (Rs/Kg)||34.80||122.60||252%|
|Gross Returns (Rs Cr)*||584.55||3873.19||563%|
|Exports (Rs Cr)||483||4086||746%|
Source: Tobacco Board (*Derived)
However, demand for FCV tobacco has reduced considerably post 2013-14 due to sharp decline in legal cigarette volumes on account of high taxes and growth of illegal cigarette trade.
In fact, since 2013-14, the earnings of FCV tobacco farmers have shrunk cumulatively by more than Rs.6,053 crores due to drop in offtake of tobacco for the manufacture of domestic legal cigarettes. From a normal crop size of 316 million kgs in 2013-14, the crop size has shrunk to an average crop size of around 215 million kgs per annum for the past 5 years.
|Drop in Earnings vs Normal
Crop of 2013-14
|Cumulative Drop in Farmer Earnings||6053|
Source: The Tobacco Board, Government of India (*Derived: Figures rounded)
Covid-19 Pandemic Causes Major Disruptions in FCV Auctions
FCV tobacco auctions witnessed severe disruptions in 2020 in the wake of lockdowns imposed by the Government to combat the spread of Covid-19 pandemic in India. The Tobacco Board initially suspended auctions in both the FCV tobacco growing states of Andhra Pradesh and Karnataka in the third week of March 2020 and allowed gradual resumption of auctions only towards the end of April 2020. This left the farmers with huge unsold stocks amidst fears of crop damage owing to prolonged storage in open fields and crash in prices due to the delayed auctioning of the perishable crop.
Even after gradual resumption of auctions, the trade remained lacklustre with lower turnout of buyers amid pandemic-linked travel restrictions. The Government of Andhra Pradesh had to participate in tobacco auctions for the first time with the State-run AP Markfed bailing out the farmers by lifting low and medium grade stock.
In view of the massive disruptions in trade and in anticipation of drop in global demand, the Tobacco Board reduced the crop size for tobacco from a total of 235 million kgs (2019) to 203 million kgs (2020). While the authorized crop size for Karnataka came down from 99 million kgs before Covid-19 to 88 million kgs subsequently, the crop quota for Andhra Pradesh this year was fixed at 115 million kgs against 135 million kgs allowed in 2019-20. With reduced crop size, farmers were left with huge unutilized land areas having no equally remunerative substitute crops to grow.
With the fresh wave of pandemic triggering a host of preventive measures and localised lockdowns in many parts of the country in April-May 2021, FCV farmers witnessed serious disruptions in tobacco trade for the second year in a row. At a time when farmers were hoping to recover the loss in earnings incurred last year due to the pandemic-triggered prolonged auctions affecting crop quality and prices, the second wave of Covid-19 pandemic hit leaf tobacco auctions again in May 2021. The Tobacco Board on May 17, 2021, suspended ongoing auctions in Andhra Pradesh for a few weeks in view of the increasing Covid-19 cases across the state.
According to a news report in The Hindu, though tobacco auctioning in Andhra Pradesh had begun on a positive note in mid-March, the second wave of the coronavirus pandemic induced a correction in the prices of various grades of tobacco within just 20 days of the beginning of auctions.
However, production of good quality crop by the farmers fetching decent prices at the auctions this year has encouraged the Tobacco Board to revive the authorised crop size for the forthcoming 2021 crop. The Board has fixed a crop size of 130 million kgs for the next crop in Andhra Pradesh while a total of 97 million kgs has been set for Karnataka.