FAIFA asks government to avoid onslaught of heavy taxation on tobacco

Indian tobacco exports are also sluggish and this has resulted in 22% decline in returns to farmers

Ahead of the Budget, the Federation of All India Farmer Associations (FAIFA) on Monday asked the government not to increase excise duty on tobacco in order to bring stability in farm prices of the crop.

The non-profit organisation representing farmers across the states, including Andhra Pradesh, Telangana, Karnataka and Gujarat, appealed to Finance Minister Arun Jaitely, to avoid "the onslaught of heavy taxation on legal cigarette industry" and help bring stability in farm prices of tobacco.

"We are very disturbed because of the declining off-take from domestic manufacturers ... Regulatory overreach has created panic and strain on the FCV tobacco farmers in the country," FAIFA General Secretary Murali Babu said in a statement.

The Indian tobacco exports are also sluggish and this has resulted in 22 per cent decline in returns to farmers, he added.

"Excessive increase in the excise duties on tobacco products, cumulative increase of 118 per cent since 2012/13, leading to 22 per cent" has led to shrinkage in the legal cigarette volumes, FAIFA said.

"The steep increase in the excise duty has led to growth of the smuggling of cigarettes in the country due to the high tax arbitrage, " it added.

Any further tax increase on the already over-taxed legal tobacco industry will only accelerate the process of diversion of tobacco consumption into the illicit and the unorganised tobacco sector, with adverse consequences on revenue collection and the tobacco control objectives of the government and serious implications on farmer livelihood, it said.