Cigarette market to see growth

Despite the ban on advertising, cigarette consumption was unlikely to decline in the near future. Cigarette tobacco consumption in marketing year (MY) 2003 was estimated at 98,000 tons, compared with 95,000 tons in MY 2002.

Cigarette production in MY 2003 in fact increased slightly to 92 billion pieces despite the government's anti-smoking measures.

These included prohibition of smoking in public places and legislation banning advertisements in mass media and the sponsoring of sports events by cigarette companies.

According to Global Agriculture Information Network, India's MY 2004 unmanufactured tobacco production was estimated to increase marginally to 665,000 tons (farm sales weight basis) thanks to higher export demand and increasing domestic consumption.

Cigarette tobaccos, mostly of the flue cured Virginia (FCV) and Burley types, constituted about 30 per cent of India's total tobacco production.

FCV tobacco production in MY 2004 was expected to rise to 200,000 tons, driven by increased productivity and a 4 per cent increase in planted area resulting from favorable monsoon rains and higher prices for the MY 2003 FCV crop.

Despite marketing problems faced by FCV tobacco farmers last year, they continued to grow tobacco in view of existing investments in infrastructure and consistently better returns from tobacco vis-a-vis other crops.

MY 2004 burley production was expected to decline to 5,750 tons owing to lower export demand and lower MY 2003 prices. Oriental tobacco production was estimated at 400 tons.

Carryover stocks were down at around 31,740 tons in MY 2002. As a result, increased export demand led to higher prices for cigarette tobaccos during MY 2003.

Karnataka FCV, a superior leaf, fetched an average price of Rs 43.6 per kilogram ($0.98) in the MY 2003 auctions, compared to Rs 35.6 per kilogram ($0.81) for the Andhra Pradesh FCV.

MY 2003 tobacco imports were expected to rise 10 per cent to 1,200 metric tons and further to 1,250 tons in MY 2004. The strength of the Indian currency and increased domestic production of international brands of cigarettes were expected to drive growth.

Exports of unmanufactured tobacco from India rose 125,000 tons in MY 2003. Buyers in the European Union, west Asia and African countries bought more as India offered better quality leaves and competitive prices.

The low-nicotine, Mysore variety FCV continued to dominate Indian exports, constituting about 45 per cent of the total unmanufactured tobacco exports.

Exports in MY 2004 were forecast to decline to 90,000 tons as a stronger Indian rupee and higher domestic prices would divert leaf to the home market.

The bulk of sun-cured 'natu' tobacco from India was exported to countries like Russia, Egypt, Germany, Bangladesh, and the Netherlands.

Income growth and increasing health awareness have led to growth in the filter cigarette segment at the cost of non-filter types.

The mini-cigarette segment shrunk in MY 2003, unable to compete with low-cost alternatives of 'beedi' or the hand rolled, leaf wrapped local cigarettes, and imported or smuggled minis from neighbouring south Asian countries.

Despite higher prices and increased availability of 'beedi', cigarette production was expected to increase by 2 billion pieces annually. Increasing income levels and health concerns about smoking high nicotine 'beedi' would tempt buyers.