India should use cash crops to its strategic advantage
Tobacco culture is suffering due to the actions of vested groups advocating high FCV tobacco taxes to achieve tobacco control goals by making cigarettes unaffordable
The World Bank has maintained its growth outlook for the Indian economy at 8.3% despite a global pandemic. To sustain growth, there would be greater demand on natural sources where agriculture plays a central role. Today, we expect agriculture to provide alternative fuels and sustainable energy sources. In India, agriculture remains the main source of employment. It is imperative for India to actualize the vision of the WH for the welfare of farmers at the heart of agricultural development.
Agricultural production needs to be aligned with good market infrastructure to enable farmers to sell their produce at reasonable prices and improve the flow of much-needed private investment into the sector for crop development and farming practices.
Many government initiatives in this regard are commendable, such as the National Agriculture Market (eNAM) to create a unified national market for agricultural products, the National Mission for Sustainable Agriculture (NMSA) to improve agricultural productivity in rainfed areas and digitization.
Cash crops like tea, coffee, tobacco, cotton have a strategic role in India’s international agricultural game. Take for example tobacco crops which are one of the major earners of foreign exchange with exports of 6,500 crore in 2021. Indian FCV tobacco has a new opportunity in the global market due to new use in medicines for several autoimmune and inflammatory diseases, including Diabetes. But for that, we need to invest in R&D to produce value-added tobacco products that capture the growing interest of buyers and thus improve the country’s position as the 2nd largest tobacco exporter.
Challenges faced by FCV farmers
Unfortunately, tobacco culture is suffering from the actions of vested groups advocating high FCV tobacco taxes to achieve tobacco control goals by making cigarettes unaffordable. This has resulted in a reduction in the size of crops with a decrease in the area of land devoted to tobacco cultivation. According to industry sources, tobacco use in legal cigarettes has seen a steep decline over the past few decades as illicit cigarettes have gained market share. This contributed to a 39% reduction in FCV crop size from 316 million kg per year to 218 million kg per year between 2013-14 and 2021-22. Our country has also witnessed a sharp decline of 1 lakh hectares in FCV tobacco acreage between 2013-14 and 2020-21, resulting in a loss of employment of 35 million man-days.
Furthermore, India’s FCV tobacco exports have become globally uncompetitive, losing share to countries like Zimbabwe, which supplies the international tobacco market despite its small size.
Today, legal cigarettes have become unaffordable in India. The cost of cigarettes in India is one of the highest in the world as a percentage of GDP per capita, at 7.70%, compared to 0.46% in the United States and 1.14% in China (WHO report ). This is even though cigarettes represent only 8% of the tobacco consumed in the country, while 92% are other forms of tobacco. This is in stark contrast to the rest of the world where tobacco is synonymous with cigarettes accounting for 90% of tobacco consumption.
The World Health Organization (WHO) in a report on the 2021 Global Tobacco Epidemic has acknowledged that the affordability of legal cigarettes in India has declined sharply from 11.10% in 2010 to 13.78% in 2020. These findings were supported by the results of the American Cancer Society study which observed that India has one of the lowest per capita cigarette consumption in the world.
The above situation is straining the farming community as consumers turn to contraband cigarettes that do not use household tobacco. This is in addition to the loss of revenue for the public purse, which further limits the government’s ability to invest in R&D, which means that farmers are unable to refine their products to meet international standards or to propose other agricultural innovations likely to increase the demand for Indian tobacco.
According to the FICCI CASCADE study, the total loss to the economy due to cigarette smuggling was 16,138 crores, while the total loss of employment opportunities in the sector is about 3.34 lakh.
Invested groups and erroneous research reports
The problem is misleading data, which decision-makers are bombarded with, limiting their ability to make informed and prudent decisions. Take, for example, two separate studies conducted in 2018 and 2020 and cited in some news articles that claim that illicit cigarette sales figures are exaggerated.
The first study uses empty packets selected from retailers to compare sales of legal and illegal cigarettes, in complete disregard of the fact that retailers would be reluctant to disclose that they are selling illegal cigarettes. No sane retailer would save the empty pack as there is deep fear because of the coercive laws against them. Our customs laws require retailers to prove that the product being sold is a legal product. Thus, researchers using this technique to understand illegal cigarette sales will only get a biased view.
The second study, on tax differentials, confirms a regular increase in the consumption of illegal cigarettes between two periods. Furthermore, the proportion of illegal cigarettes as a percentage of legal cigarettes in the two studies shows a difference of more than 100%, which raises doubts about the accuracy of the figures.
It is indisputable that cigarette smuggling is a raging phenomenon not only in India but in all international markets. It has been established through studies by reputable research companies that India is the fourth largest and fastest growing market for illegal cigarettes in the world.
According to Euromonitor International, volumes of illicit cigarettes in India have registered a whopping 44% in a decade, rising from 19.5 billion sticks in 2011 to 28.1 billion sticks in 2020. This pushes the market share of cigarettes in the country from 21.3% in 2015 to 27.6% in 2020.
It should be noted that a report recently published by the Organized Crime and Corruption Reporting Project (OCCRP) indicates that one of the world’s largest multinational cigarette companies as part of its market expansion strategy used contraband as one of the distribution channels to expand its market. penetration. Unfortunately, invested groups do not share these market developments with policy makers.
Despite this, the decision to project in the studies low levels of illicit cigarette penetration below international markets (which are better regulated) is an obvious projection error.
These extremely unreliable studies should be viewed with caution as they paint a biased picture of the illegal cigarette trade in the country and downplay the seriousness of the illegal cigarette trade in the country.
India has the opportunity to use cash crops like FCV tobacco to its strategic advantage given the huge potential of tobacco in new applications. We must not miss this opportunity and give all necessary political support to FCV tobacco producers to capture the growing tobacco market.
(The author is the President of the All India Federation of Farmers Associations (FAIFA), a non-profit federation whose mission is to support the farming community in India and create a sustainable future for farmers)