The Union government is actively considering introducing contract farming to add buoyancy in trading of Flue Cured Virginia Tobacco.
The proposal to introduce contract farming has begun to gain traction after the high-level meeting held at the Tobacco Board recently, in which Secretary of Commerce B.V.R. Subrahmanyam and Joint Secretary Divakar Nath Mishra were present. Contract farming is also one of the features of the new Farm Laws.
“Contract farming will end the monopoly of a single largest player and ensure a level playing field. Foreign Direct Investment in tobacco trade in India will certainly open up the market,” said a senior official.
Another issue which came up during the meeting was dismal exports of FCV Tobacco. Mr. Subrahmanyam, a senior officer belonging to the 1987 batch, reportedly minced no words in pointing out that dismal exports of unmanufactured FCV Tobacco and Non-FCV Tobacco in the year 2021 (April-August) fetching a mere $386.05 million, which is about one-third of the target of $1.1 billion, had been discouraging.
The trend in exports continues to cause concern and reflects the uncertainties in the global market. Tobacco exports hit the $1-billion mark in 2013-14, after notching a high of $924.14 million in 2012, but since the year 2015, the trend is clearly on the decline.
The year 2015-16 witnessed a steep decline in exports with 2.09 lakh metric tonnes marketed fetching $661.59 million. Since then, the trend of declining exports earnings continued with $633.23 million in 2016-17, $600.43 million (2017-18), $563.20 million (2018-19), $538.93 million (2019-20), $519.71 million (2020-21). The current fiscal witnessed a further slump with the earnings just over $386.05 million (till August 2021), a notch higher than the same corresponding period in the year 2020.
The factors leading to a fall in exports include gradual reduction of FCV tobacco production. With India being a signatory to Framework Convention on Tobacco Control, the constraints on tobacco production remain. But this is going to change, with the Centre giving a clear hint on increasing the production of tobacco to about 227 million kg, a 15 to 20 per cent increase from the existing crop size.
Trade diplomacy with European countries such as Germany and Russia to reduce import duties is also being considered and talks are being held with BAT, JPI and other players to boost exports.
“The government is also mulling to encourage small and medium buyers in export of tobacco and these measures will certainly open doors to many players in the tobacco sector in India and ultimately create a level playing field,” said the official.
The Tobacco Board has taken measures to boost exports, conducting virtual meetings with Indian unmanufactured tobacco exporters to discuss strategies for increasing exports, maintaining regular communication through diplomatic channels with global importers and Indian missions.
