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 (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 causing shrinkage of farmer earnings.
With the continued presence of a large illicit cigarette market in the country, FCV tobacco farmers have seen their crop offtake reduce substantially over the years leading to a loss of 35 million man-days of livelihood.
Source: Tobacco Board, Government of India
The FCV tobacco production in India had dropped from a high of 316 million kgs in 2013-14 to 189 million kgs in 2021-22. The pragmatic tax policy of recent years has resulted in the recovery of legal volume and higher demand for domestic FCV tobaccos. Consequently, FCV crop production during 2022-23 was higher (241 million kgs), however, it still remains below the levels attained in 2013-14.
