You are here: Home » Economy & Policy » News
Business Standard

Call for FDI in tobacco industry

Chandrasekhar  |  Guntur 

A high-level committee constituted by the Tobacco Board, has recommended foreign direct investments (FDI) in the domestic tobacco crop development and cigarette manufacturing.

The report, to be released soon, studied in-depth the problems plaguing the tobacco industry, and offered solutions to make it commercially viable and internationally competitive.

The committee comprises farmers, traders, exporters, scientists, agriculture department officials of AP and Karnataka, besides the Tobacco Board executives.

In a 17-page report, it pointed out that the global tobacco trade was dominated by MNCs and international leaf merchants.
"They invested huge amounts in the tobacco sector of Brazil, Zimbabwe, Malawi, Argentina and other third world countries. Hence they source their tobacco requirements mostly from farmers of those countries. As sweeping global reforms are taking place in our economy, it is high time that the government allowed foreign companies to take part directly in the tobacco crop development and cigarette manufacturing," says the report.

"Though the Indian tobacco is less harmful, our exporters lose their share to their fiercely competing counterparts from Brazil and Zimbabwe who offer quality tobacco at a very competitive price. Their devalued currencies also help them to upstage our exporters. MNCs captured 65 per cent of trade in Russia, which favoured only Indian tobacco a few years ago. Our exporters also face stiff rivalry from China and Russia, which now produce low-cost tobacco," the committee described the global scenario and the growing threat to the Indian tobacco.

Exporters from Zimbabwe, Malawi and other countries enjoy zero duty tariffs in the European Union and Australia, which affects Indian tobacco trade.

"US does not reciprocate India's overtures in tobacco sector. Europe, Argentina and the US give massive subsidies to their tobacco farmers, the report outlined the factors the Indian tobacco exports.

The report calls upon the tobacco farmers to realise that the importers buy tobacco more for its fill value than its flavour characters.

The tobacco yield per hectare in India is around 1,200-1,800 kg as against the 2,600 kg produced in the US and Zimbabwe, and the 2,000 kg reaped in Brazil.

The demand for light tobaccos like FCV and Burley is growing. Production strategies should be changed accordingly to produce more FCV and Burley varieties, the committee advises.

Consumers now prefer cheaper brands with good quality to high-cost cigarettes. International cigarette manufacturers are relocating factories to countries where low- cost FCV tobacco is available aplenty.

Farmers should ensure supply of ripe and pliable tobacco with good burning, good productivity and flavoured smoke, tobacco with balanced chemistry with low tar and low tobacco specific nitrosamines (TSNA), tobacco without non-tobacco related materials (NTRM), and cost competitive tobacco sans pesticide residue.

The committee appeals to the Andhra Pradesh and the Karnataka governments to extend the model project area and model village programmes to the tobacco growing areas to help farmers cultivate world-class tobacco and accomplish product integrity.

It also seeks continuation of DEPB benefit for exporters and exploration of alternative uses of tobacco.

Oriental and fire cured tobacco areas should be declared as agri export zones, giving 100 per cent benefits to farmers, according to the report.

The Indian cigarette brands need to be established in markets abroad. "The government should highlight the strengths of the Indian tobacco through international media that our tobacco contains least TSNA, cadmium, lead and other harmful materials," the committee recommends and calls for liberalisation of labour laws.

First Published: Wed, December 24 2003. 00:00 IST