Fall in tobacco price has growers worried

MYSORE OCT. 26. Tobacco growers in the Mysore region are a distressed lot these days because of the steep fall in the average price of tobacco.

Nearly five million kg of tobacco has been traded in the market since its opening on September 10, but the average price of the leaf has been consistently lower than last year. While the average price hovered between Rs. 46 and Rs. 48 in the corresponding period last year, it has ranged between Rs. 38 and Rs. 40 this year. The highest grade of tobacco fetches about Rs. 60 and the lowest grade Rs. 16.

The prices of FCV tobacco grown in the Mysore region this year too have not appreciated despite the fact that there has been a marked improvement in the quality of tobacco leaves. The cause for the fall in the price of tobacco is due to a slump in demand. While traders have been insisting that prices will go up only after a rise in the demand for tobacco in the international market, farmers want the traders to ensure that they get at least last year's prices.

According to traders, the other reason for a fall in the price of tobacco is the rise in its output in the State. Tobacco production has increased from 60 million kg last year to 80 million kg this year. Traders say a market has to be found for the additional output. FCV tobacco grown in the Mysore region has a good demand in the international market and is exported to countries such as Brazil, Argentina, Canada, Zimbabwe, and Russia. Even though Zimbabwe is one of the largest tobacco producing countries in the world, its output has fallen from over 100 million kg to around 50 million kg due to the racial strife there.

Known for its low nicotine content compared to the tobacco grown in Andhra Pradesh, 60 to 70 per cent of the FCV tobacco is exported. It is also blended with the tobacco grown in Andhra Pradesh.

The president of the Karnataka FCV Tobacco Growers' Association, B.V. Jaware Gowda, told The Hindu that the average price of tobacco had seen a sharp decline due to the traders forming a cartel. He said: "Traders can buy tobacco at the previous year's prices. The lack of demand in the international market is only a pretext to keep prices as low as possible."

He said traders worked as an organised unit and created a buyer's market while the unorganised growers were the victims. The average holding of a small/marginal farmer in the region was around 2.5 hectares. The tobacco major, ITC, bought more than 25 per cent of the total tobacco grown here, and traders, a majority of whom hailed from Andhra Pradesh, picked up the rest.

He said tobacco farmers were in distress due to a rise in the cost of production and a fall in prices.

In fact, the Tobacco Board fixed only a minimum support price (MSP). It did not play any role in fixing the market price of tobacco, he said. The minimum support price was usually less than the actual cost of production. Though the actual cost of production was around Rs. 38 for all varieties, the MSP was around Rs. 33. Fortunately, market prices had always been higher than the MSP fixed by the board.

Outlining the dominance of traders in tobacco trading, Mr. Gowda said the minimum guaranteed price, a gentlemen's agreement between the board and traders, was never adhered to. The Tobacco Board Act had a provision for gentlemen's agreements, he added.

He said the board should focus on the collection of details such as the prevailing trend in the world market, prices, and output in different countries. With the help of the Indian Tobacco Trade Centre managed by ITC and Indian Tobacco Traders' Association, traders had easy access to such details. But, without any help from the board, farmers had no alternative but to sell their produce at prices fixed by the cartel, he said.

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