Problems of Tobacco Farmers in India

In the recent past several famers cultivating tobacco have committed suicide due to low price; less demand and several other issues. Though it is a cash crop yet being a “demerit good” it demands balance on part of the government between public health and livelihood of the farmers.

About Tobacco Crop and Cropping Patterns

Despite that Tobacco is farmed over only 0.24% of cultivable area in India, the country is world’s second largest producer of this commodity {after China} with around 800 million Kgs of annual production. It is grown in at least 13 states of India in semi-arid and rain-fed areas. The main tobacco producing states include Andhra Pradesh, Telangana, Chhattisgarh, Madhya Pradesh, Assam, West Bengal, Bihar, Uttar Pradesh & Gujarat.

Tobacco is a Rabi season cash crop that provides employment to around 36 million people in India. Since 60% of the country produce is exported, it contributes nearly 1300 crore annually in terms of foreign exchange. Domestic tobacco industry also contributes nearly Rs. 8000 crore to government through indirect and direct taxes. Despite all these, in recent years, the Indian Tobacco Industry is facing survival challenges.

What are the major challenges for Tobacco farmers and Tobacco Industry?

The problems of the Tobacco farming / industry are mainly because of its being a demerit good. Demerit Goods are those goods whose consumption leads to negative externalities. Tobacco, Alcohol etc. are demerit goods. India being a signatory to WHO-led Framework Convention on Tobacco Control (FCTC) (2005), has pledged reduce tobacco usage. As part of this, the government has started working towards bringing down the production and consumption of tobacco. Under the Cigarettes and other Tobacco Products Act (COTPA) of 2003, the union health ministry has increased the area of pictorial warnings on tobacco packaging to 85 percent.  Further, rules under Food Safety and Standards act 2006 discourage the use of tobacco and nicotine as ingredients in any food product. Moreover, the National Tobacco Control Programme has created the more awareness about ill-effects of tobacco consumption. All these measures have reduced the domestic demand for tobacco and reduced the price support to the farmers.

Second problem is of taxation. Unorganized sector produces around 70% of tobacco consumed in India and since unorganized sector does not come under tax net government generally finds no incentive to promote this crop or industry. Further, to reduce consumption, the government needs to put higher and higher taxes only on tobacco products, thereby, affecting the organised sector. Government’s high taxation on legal tobacco products has also encouraged the growth of illegal and smuggling of cigarettes. This has further reduced the domestic demand of tobacco.

Third major problem with the tobacco farming is erratic weather.  In the recent years, the Tobacco farmers have faced problems of drought, erratic climatic conditions and other related issues.

Government Policy on Tobacco Farming

The government had to deal with a paradox in terms of tobacco industry and crop. On one hand, it has to adhere to its international commitments to reduce tobacco consumption while on other hand has to protect the livelihoods of lakhs of farmers also.  The union government is actively pursuing with states like Andhra Pradesh and Karnataka, major growers of tobacco, to chalk out plans to help farmers shift to alternative crops. Government is ready to provide economic and technical support for shift to alternative crops. The government has another five years of time to meet the obligation to halve the tobacco production by 2020, in accordance with the FCTC. Government has issued certain regulations under the Food Safety and Standards Act, 2006, which lay down that tobacco or nicotine cannot be used as ingredients in food products.

Policy Options and Alternatives

One of the main policy options is to provide another livelihood to producers of demerit goods. This will also help the country to stick to Article 17 and Article 18 of WHO. Article 17 aims to provide support for economically viable alternative activities and Article 18 relates to the ‘Protection of the environment and the health of persons.  As per recent study, cultivation of protein rich pulse crops, particularly Bengal gram and Red gram has been found more lucrative than the tobacco cultivation for farmers, and hence have been proposed as alternatives to tobacco.  The Rajahmundry-based Central Tobacco Research Institute suggested alternative crops like black pepper, sugarcane, oil palm and maize.  We note here that Bengal gram and Red gram production is better alternative because they have better MSP support also.

Further, the government has recently decided to allow global companies to directly participate in the tobacco auctions. This move is expected to increase the competition at the auction platforms and provide some relief to farmers. Federation of All-India Farmers’ Association (FAIFA) is working in coordination with government to draft a “well-balanced’’ tobacco control policy. Crop diversification programme of the government has been extended to tobacco growing states, thereby, encouraging tobacco growing farmers to shift to alternative crops or cropping systems.