Plea for de-regulation of tobacco sector

Former Rajya Sabha member and farmers' leader Y Sivaji on Wednesday demanded that the tobacco sector be immediately delicensed and foreign direct investments (FDI) allowed in the tobacco industry.

"This is the first pre-requisite the government should execute if it is really serious about saving the tobacco industry and thousands of tobacco growers in the country," he said.

Speaking to Business Standard, Sivaji dubbed the auctions, which are expected to begin on January 23, as "re-enactment of every year's fake drama."

There had never been any competition in the Tobacco Board auction floors and it would be the same this year also, he said. He regretted that the farmers were always denied remunerative prices.

He substantiated his charge by saying that the Indian tobacco farmers were paid 70 cents per kg, while their counterparts abroad receive five times more than that.

"Reforms in tobacco sector have shown wonderful results in Brazil, which in mid-sixties produced 10 million kg of tobacco, and now harvests 400 million kg of tobacco. As there has been no liberalisation in our tobacco sector, the production is gradually coming down, with export prospects remaining bleak," he lamented.

"Of the tobacco produced in the country, 50 per cent went for domestic consumption until few years ago. Of the other 50 per cent crop, one-third was exported to the neighbouring Saarc countries. Fifty per cent was shipped to the erstwhile USSR and other East European countries. The remaining exports were lifted to hard currency countries," he recollected and said that the Indian tobacco growers were unable to capture the markets of US, Japan, Singapore, Turkey and Germany and other European countries due to two constraints.

"Western countries have become choosy and quality-conscious. Their subsidiaries in our country purchase tobacco to the extent of dividend or bonus neutralisation only. Moreover, the parent companies banned their Indian subsidiaries not to sell tobacco and tobacco products in the external markets," he said.

"Globally, the tobacco trade had been monopolised by five or six international merchants. They were the only suppliers to both sellers and buyers all over the world. Any cigarette manufacturer purchased from them only. Hence, order or no order, these merchants had entered a number of markets and purchased the crop directly from growers. Unfortunately, these merchants were not allowed to enter our tobacco markets and purchase the produce directly from our farmers. As a result, competition is totally dead in our markets,"he said.