 "Price sag dampens tobacco growers")
First, growers of Flue Cured Virginia (FCV) tobacco in South India faced lower price realisation, despite a steep cut in crop size by the Indian Tobacco Board. Now, growers of unregulated tobacco varieties in Gujarat face a similar situation. This is in the aftermath of the largest pictorial warnings mandated for printing on tobacco product covers, and demand from bidi and zarda (a refined form of chewing tobacco) makers in Gujarat has fallen.
Crop prices are down to Rs 700-1,200 for 20 kg (Rs 35-60 a kg) from the earlier Rs 1,800-2,200 for 20 kg (Rs 90-110 a kg) in Gujarat. This and the unsold stocks with farmers might reduce tobacco farming by 20-25 per cent in Gujarat, a state normally producing 360 million kg annually, on 150,000 hectares, involving 450,000 farmers. Gujarat accounts for 45 per cent of an estimated 800 mn kg of tobacco produced annually in the country.
Bhikhubhai Patel, president, Gujarat Tobacco Merchants Association, said: “The crop in Gujarat is mostly consumed by bidi and zarda manufacturers but this year at the peak season, the demand was almost nil due to the 85 per cent health warning rule; companies had stopped procurement for two months. So, prices have gone down and farmers faced a loss. In this situation, farmers might go for other crops.”
As for FCV tobacco, used in cigarette making and grown only in Andhra Pradesh and Karnataka, it was already hit by higher central taxes on cigarettes, on top of lower export demand, even before the larger pictorial warning issue came up.
Last year, Andhra farmers faced a crisis on account of unsold stocks, triggering a spate of suicides, as cigarette manufactures and the exporters did not find sufficient demand to purchase the available produce.
The Board then restricted the crop size to 215 million kg (120 mn kg for AP and 95 mn for Karnataka), as compared to 273 mn kg the previous year (173 mn for AP and 100 mn for Karnataka).
However, prices weren't substantially different this year, though higher. "We thought the restricted crop size would bring demand and push prices to a desirable Rs 140-Rs 150 a kg or higher. That did not happen," Murali Babu of the Tobacco Growers Association told this newspaper.
As on June 15, about 60 mn kg of tobacco was bought from farmers on account of a higher export demand, compared to 49.2 mn kg by the same time last year. The average price realisation was Rs 123 a kg, as compared to Rs 107 a kg in the crisis period last year.Around 30 per cent of FCV tobacco is procured by cigarette makers, led by ITC. The rest is exported.
"Ours is a largely export-dependent crop, though export demand is not picking up because of the anti-tobacco campaign underway in all major countries. Usually, our FCV tobacco gets a good export price whenever there is a shortfall in other major growing countries," G Seshagiri Rao, vice-chairman of the Tobacco Board, told this newspaper.
Rao still believes demand will pick up in the coming days. However, a shift is visible in the cropping pattern at the southern light and black soils, where FCV tobacco has got a lower price. "There is almost a 50 per cent reduction in crop area in Prakasam district. Those farming tobacco in the southern black soil were hit the most by the price fall and these farmers have shifted to pulses and chilies," said G Bhaskar Reddy, the Tobacco Board's regional manager. He said he expected a similar trend in the coming seasons.
In Gujarat, 25-30 per cent of stocks are still with farmers and with no proper storage facility, there might be quality issues, further impacting the profitability.