Tobacco farmers for FDI in tobacco processing and trading

New Delhi, Mar 22 (UNI) An influential group of tobacco farmers from Andhra Pradesh is in Delhi to pressurise the Commerce Ministry to allow FDI in tobacco trading, processing and cigarette manufacturing sectors.

According to them, this will end the monopoly enjoyed by local cigarette manufacturers and ensure percolation of benefits to farmers sustaining on meagre returns.

The returns to tobacco farmers in India is as low as Rs 50 a kg while the companies produce 1,250 cigarettes out of this raw material and each stick costs around Rs three.

The returns for the tobacco farmers in Zimbabwe and Brazil is about Rs 100 per kg compared to Rs 50 of Indian farmers. Unlike India, production in these countries is not restricted but has been increasing during the last four decades.

There are five major cigarette makers in the world but in India only two of these companies have a free run, thanks to the government policy which allows no investments in tobacco sector so far.

Using their monopoly status, the parent companies of Indian manufacturers do not allow cigarette exports outside India, Mr Y Sivaji, President of Virgenia Tobacco Growers Association of India, also a former Member of Parliament said.

The investment opportunities in Brazil and Zimbabwe had resulted in cultivation and processing even though their quality was comparatively lower than India.

He said every 100 dollars of tobacco imports to UK will result in the company turning out an end product worth 450 dollars while the figure was 1:8 in Netherlands. Such being the case, it would be better to allow competition and buoyancy in the sector and end the monopoly.

Dr Sivaji said tobacco production in India was in the range of 250 million kg annually confined to Andhra Pradesh and Karnataka states. Of this production, 100 million kg was consumed by domestic cigaette manufacturers and the rest was exported by the cartel resulting in the farmers losing out on price front.

India, he alleged, was offering protectionism not to Indian farmers and consumers but bolstering the profits of the trans-national companies. Since there was no scope for increasing the production, the tobacco companies were making forays in countries like the Philippines, Bangladesh, Sri Lanka and China.

He said the presence of MNC tobacco manufacturers in the areas of processing and trading in India would help improve marketing prospects of Indian tobacco.

UNI