Trade Articles

India has witnessed an unforeseen increase in its tobacco exports, which has escalated by 55% to reach at $169 million in first quarter of 2008/09. The shortfall at the international level has forced the global buyers to source indian leaf at a higher price. Mr. J Suresh Babu, the chairman of the Tobacco Board said, "Exporters are buying aggressively. There is a shortfall in production globally. Production in Brazil is down, in Zimbabwe it is steady". Many big companies are showing their interest in purchasing tobacco at higher quantities from india and thanks to which the country’s 2008-09 exports could touch the mark of $600 million, which is 19 per cent more than from $503 million of last year. The april-june figure of 2008 shows that there has been considerable increase in the export of tobacco as compare to the last year figure of the same period. During this time period export has been recorded at $169 million, which was $109 million in the same period a year ago. The British American Tobacco, Japan Tobacco Inc, Philip Morris International and Imperial Tobacco Plc have been recognized as the country’s main buyers. The senior official quoted that "Exporters are buying aggressively. There is a shortfall in production globally".

India exports nearly 55 per cent of the total Flue Cured Virginia (FCV) yield and the rest is available for consumption in the domestic marketplace. FCV is the top notch quality which is used for making cigarettes. The impact of rising exports got visible in the profit level of domestic cigarette makers. The increasing level of the exports have triggered the prices of tobacco which in turns has trimmed the profit of domestic cigarette makers. Mr. Babu remarked that "Considering exports, I think prices will stay at this level in rest of the year." After China, India is worldwide acknowledged as the second biggest producer of tobacco and known as the fourth biggest exporter of unmanufactured tobacco. Mr. Bellam Kotaiah, president of the Indian Tobacco Association clarified that the international buyers are paying around 50 per cent-70 per cent more as compare to what they were paying last year and it is reflected in the export figure. Further he added that the "Last year the average price was around $2.3 a kg. This year it has gone up to $4," The leading domestic buyers of tobacco are ITC Ltd, a Kolkata based company, Godfrey Philips India Ltd and Vazir Sultan Tobacco.

For keeping the surging rising trend of tobacco exports intact, the tobacco board has come up with new introductory methods with a sole aim of increasing the height of India’s tobacco industry in throughout the world. In india, tobacco growers are registered under the tobacco board which is regulating the sector. In amidst of the concerns related to the the growing areas under tobacco, the tobacco board has issued a warning to the farmers against all types of illegal cultivation of the crop. The board has clarified that any plantation done in the unauthorized field will be destroyed. Tobacco board Chairman said "We have cautioned farmers that they should not resort to unauthorized farming, otherwise, we will destroy such crops". He said that "It is natural on the part of farmers to increase acreage after the tobacco prices hit through the roof this year. But we are vigilant. Acreage in Karnataka has shot up to about 80,000 hectares against 75,000 hectares last year. However, plantation in Andhra will start in September."

Farmers in different parts of the india are more vigorously getting back to the tobacco cultivation after a massive increase in prices at domestic level followed by the major spurt in nation’s exports, greatly boosted by the shortfall of production in major overseas markets like china. In 2008, Indian tobacco prices have seen a shoot up from the range of 2-6.5 dollars/kg as compare to what was remain in between 80 cents and four dollars a kg in 2007. Caught up in this high worldwide demand, in Andhra Pradesh prices of best quality tobacco has been increased from Rs 65 in 2007 to reach at Rs 141 per kg in 2008. The price of average quality tobacco has also seen an increase from last year Rs 47.47 to this year Rs 84.85.

A Glimpse of the India's Tobacco Industry

India is exporting tobacco in more than 80 nations, over all continents. At present the industry is providing livelihood to more that 25 million people in India. Out of the total tobacco items exported from india, unmanufactured tobacco shares around 80 per cent to 85 per cent of the export while the manufactured tobacco products hold around nearly 20 per cent to 25 per cent. In the unmanufactured tobacco exports, Flue Cured Virginia tobacco accounts to the single largest item with nearly 75 per cent to 80 per cent export. The other exported varieties are- Burley, HDBRG, Natu, DWFC, Top leaf and Jutty. All these are used for making cigarettes. Non cigarette tobacco exported worldwide are Lalchopadia, Judi, Rustica. These are used for chewing and making bidis. Around 8 per cent to 10 per cent non- cigarette tobacco is exported in throughout the world. Contrary to international trends, non cigarette tobaccos are the dominated item in the nation’s export. The current situation in the international tobacco market is proved to emerge out as the favorable market for the indian tobacco export. The prices of brazilian export have almost equalized the most expensive american tobacco cost. Zimbabwean farm prices have also seen an upward trend. There are several advantages which can be put forth for favoring the indian tobacco. Like low unit production cost, average export prices of indian tobacco FCV, which are found more competitive than that of the prices of Brazil, USA, Zimbabwe.