New Delhi: India’s tobacco exports are likely to touch Rs16,050 million towards the end of current fiscal, from Rs15060.20 million in last fiscal, as growers get ready to export more than 60% of their produce in view of domestic tobacco’s rising demand in countries like Russia, Vietnam, UK, Germany and Belgium.
According to a study carried out by Assocham on ‘Prospects of tobacco to exports for current fiscal’, domestic tobacco sector in the past few years has come out of ressession, impact of which would be favourable, leading to higher tobacco exports.
Key findings of the study
* Export potential of Indian tobacco would be much more if Indian farmers are paid reasonably well for growing tobacco crops proportionally as in leading tobacco growing countries (Brazil & Zimbabwe).
*Tobacco farmers, in a country like Brazil are paid $1.8 per kg as against $2 per kg in Zimbabwe. In India, tobacco growing farmer’s condition is poorer as they are paid only 80-90 cent per kg.
* Heavy taxation on tobacco in India (in cigarettes it is around 350% as against 70% in Brazil & Zimbabwe) is a further deterrent.
* Productivity is high in Zimbabwe at 3200Kg per hectare, whereas it is 1900 kg in Brazil and around 2000Kg in India. However, tobacco leaves of Brazil and Zimbabwe contain high nicotine and a sizeable unwanted external content. Indian tobacco, on the other hand, contains negligible nicotine and other toxic matter and is famous for fascinating flavours.
* In 2005-06 tobacco exports in quantity were 1,65,882 tonnes and in value terms the export realization was to the tune of Rs14047.20 million. A
* During 2006-07, tobacco exports in value terms comprised Rs15060.20 million. In volume their quantity was estimated around 1,70,005 tonnes. T
* Russia was the largest importer of Indian tobacco in 2005-06 importing 27,513 tonnes of tobacco (leaf and products) from India followed by Belgium (15,411 tonnes), Vietnam (7749 tonnes), UK (7721 tonnes) and Germany (6354 tonnes).
*During 2006-07, their imports respectively were Russia (27,950 tonnes), Belgium(15,800 tonnes), Vietnam (7949 tonnes), UK (7921 tonnes) and Germany (6524 tonnes)
* West Europe was importing 30 % (43,213 tonnes) of Indian tobacco and was the largest importer. East Europe, which imported 40,167 tonnes (20%), came in second followed by South Asia & South –East Asia bought 31,656 tonnes (22%),Africa 12,618 tonnes(9%), West Asia 7917 tonnes (6%), North and South Americas 4192 tonnes (3%) and Australia 2244 tonnes (2%) in 2005-06.
*In India, about six million farmers are engaged in cultivation of tobacco and about 36 million people are dependent on tobacco industry, directly or indirectly; hookah tobacco paste 879 kg led exports of tobacco products followed by cigarettes 1011 Kg.
* Of total exports of tobacco items form the country, unmanufactured tobacco accounts for 80-85% and manufactured tobacco products account for 20-25%.
*Of unmanufactured tobacco exports Flue Cured Virginia (FCV) tobacco is the single largest item accounting for 75-80% of tobacco exports. Other varieties exported are Burley, HDBRG, Natu, DWFC, Top leaf and Jutty – all are cigarette tobaccos.
*Non-cigarette tobaccos exported are Lalchopadia, Judi, Rustica for chewing purposes and bidi tobacco in small quantities. Export of non-cigarette tobaccos is roughly 8-10%. Contrary to international trend, India’s tobacco production is dominated by non-cigarette tobaccos.
Favourable market environment
Currently the situation in the global tobacco market is transforming into a favourable market environment for tobacco exports . Brazilian export prices have almost leveled the most expensive American tobacco prices. Zimbabwean farm prices are higher than Brazilian prices. Increasing cost of production and export cesses imposed on tobacco exports by Governments of Zimbabwe and Malawi recently made their tobaccos further expensive.
Newly opened East European and CIS markets are not in a position to absorb high cost tobaccos or cigarettes made with high conversion cost. Phasing out farm subsidies by EU will enhance price competitiveness of Indian tobacco.