Hike in Tobacco Prices

Hike in Tobacco Prices

Context: The recent surge in auction prices for tobacco in Andhra Pradesh is directly linked to the decline in crop yields in countries like Brazil, Zimbabwe, and Indonesia. Droughts and untimely rainfall have negatively impacted tobacco production in these regions, leading to reduced supply in the global market. As a result, tobacco farmers in Andhra Pradesh are poised to benefit from the increased demand and higher prices for their crops.

Key facts about Tobacco:

• Agro-Climatic Facts:
o Tobacco originates from tropical regions but thrives under tropical, subtropical, and temperate climates.
o Ideal growing conditions include a frost-free period of 100 to 120 days with an average temperature of 80°F and well-distributed rainfall of 88 to 125 mm per month.
o Relative humidity ranges from 70-80% in the morning to 50-60% during midday.
o Different tobacco types have specific soil and climatic preferences for optimal growth, with Fluecured Virginia (FCV) thriving on soils like sandy loams, red loams, and black cotton soils.

• Economic Significance:
o Tobacco is among the most economically significant crops globally.
o India\'s tobacco cultivation covers approximately 0.27% of the net cultivated area, producing around 750 million kg of tobacco leaf annually.
o Annually, tobacco contributes significant excise revenue (Rs 14,000 crores), accounting for 4% of the country’s total agri-exports.
o India is the third largest tobacco-producing nation and the second largest consumer of tobacco worldwide.

• Diversity in Production:
o India produces various types of tobacco, including FCV, Bidi, Hookah, Cigarwrapper, Cheroot, Burley, and Oriental, across 15 states.
o Gujarat, Andhra Pradesh, and Karnataka are the top three states in both area and production of tobacco in the country.

• Employment and Livelihood:
o Tobacco cultivation provides livelihood security to around 36 million people in India, including farmers, farm laborers, and workers in processing, manufacturing, and exports.
o Bidi rolling alone employs around 4.4 million people, with 2.2 million tribals engaged in tendu leaf collection.

• Export Market and Competition:
o India exported tobacco and tobacco products worth Rs 9,740 crore during 2022-23, with major
contributions from cigarette-type tobacco like FCV and Burley.
o Major importers of Indian FCV tobacco include the UK, Germany, Belgium, South Korea, and South Africa.
o Key competitors in the export market include Brazil, Zimbabwe, Turkey, China, and Indonesia.
o India, despite being a major producer (13% of global production), exports only 30% of its tobacco compared to leading countries like Brazil, USA, and Zimbabwe, which export between 60-90% of their production.

• Competitive Advantage of Indian Tobacco:
o Indian tobacco has lower levels of heavy metals, Tobacco Specific Nitrosamines (TSNAs), and pesticide residues compared to other producers.
o Varied agro-climatic conditions in India allow for the production of diverse tobacco styles, meeting global preferences.
o India\'s competitive advantage lies in lower production costs and export prices, making Indian tobacco considered \'value for money\' in the global market.

Health Burden of Tobacco: