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)
|Average Price (Rs/Kg)
|Gross Returns (Rs Cr)*
|Exports (Rs Cr)
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.7,500 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 189 million kgs in 2021-22.
Source: Tobacco Board, Government of India
The massive drop in FCV tobacco production has resulted in loss of livelihood of farmers and workers in the tobacco growing areas of the country. An estimated 35 million man-days of employment have been lost due to the FCV tobacco crop reduction.