Tobacco prices in Andhra Pradesh plunge on oversupply

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Farmers with their produce at a tobacco auction centre near Throvagunta in Ongole, Andhra Pradesh
| Photo Credit:
KOMMURI SRINIVAS

After four years of a dream run fuelled by global demand for Indian tobacco, the tobacco farmers now face a serious crisis as the prices plummet. Though there is no imminent threat to farmers growing FCV (Flue-Cured Virginia) tobacco, those who grow Black Burley variety face a tough challenge as the production went up by three times to 80 million kg as against the normal output of 30 million kg.

Seeing a consistent good demand over the last four years, the farmers increased the acreage significantly as it is a more bankable crop when compared to paddy, maize, and pulses.

Sensing an imminent drop in prices globally, the Tobacco Board, a tobacco crop regulator under the Union Ministry of Commerce, and traders had cautioned against increasing the acreage ahead of the season.

Farmers are up in arms in Andhra Pradesh, the biggest tobacco producer. The issue took a political turn with the Opposition parties, farmers’ associations demanding that the Tobacco Board and the Government take action. AP Chief Minister blames the Tobacco Board for the crisis, while the Board argues that its mandate only covers Virginia tobacco.

Farmers, the Opposition parties, and the Government are bringing pressure on the Tobacco Board to convince the traders to lift the stocks. The Board, however, contends that its mandate is only to take care of the FCV tobacco.

A source in the industry said that the average annual market for Black Burley would be around 25-30 million kg. Traders would form informal agreements with farmers to grow stipulated quantities of the commodity. But this time around, seeing good prices last year, farmers increased the acreage in Black Burley, shooting up the output to 80 million kg.

Across FCV, Light Soil and Black Burley varieties, Andhra Pradesh produced 460 million kg of tobacco.

The Board, which stipulates the acreage for Andhra Pradesh and Karnataka – the two hubs in the country for FCV tobacco, says that there should be no problem as far as FCV tobacco is concerned.

“We have stipulated a crop size of 167 million kg. But it looks like the output could top the 240-million kg mark. Though it crosses the stipulated output mark, we can manage. The real challenge comes with Burley variety of tobacco,” Tobacco Board Chairman Yashwanth Chidipothu told businessline.

The farmers and the Opposition parties took to the streets, demanding the Government and the Board to ensure all the stock with farmers is lifted.

With the issue snowballing into a political crisis, Andhra Pradesh Chief Minister and Telugu Desam Party President N Chandrababu Naidu hauled up the Board for the crisis. He held a review meeting to discuss the crisis around tobacco sales and blamed the Board for poor coordination with companies like GPI and ITC, which led to the present crisis.

“While companies lured farmers with the promise of high prices, they slashed rates at harvest time, which is unacceptable,” he said, faulting the companies for creating the crisis.

“Following a request from the government, we set up a control room, with representatives from the government and traders, at the Board’s headquarters to monitor the situation. We have been requesting the traders to help clear the stocks,” Yashwanth said.

Keshava Rao, Vice-President of Andhra Pradesh Rythu Sangham, said the farmers are planning protests over the next two weeks demanding government intervention in resolving the crisis.

Tobacco exports from the country went up to about ₹16,000 crore in 2023-24, registering a growth of two-and-a-half times over the last five years. The crop size was at 145 million kg, including 100 million kg from Karnataka. The crop size from Karnataka was at 38 million kg in 2001-02, and steadily expanded over the years. The acreage went up to 1.62 lakh acres from 1.35 lakh acres during the period.

“Though there have been efforts to discourage the farmers from tobacco, they continued to stick to this commercial crop as it offers relatively assured prices when compared to crops like maize and paddy,” Vivekananda Kakarla, a tobacco farmer in East Godavari district, said.

No penalties

For some time, the board used to levy a penalty on farmers who crossed the area stipulated for them. Penalties, which used to be 5 per cent, including 1 per cent cess (on every additional kilogram), are hard to implement as it is a politically sensitive issue.

Despite a steady increase in the output, the processing capacities of companies have not increased, as they could process the commodity throughout the year.