Export is a pre-requisite for the growth of any country. We have got advantage of a wide range of soils and climatic conditions to produce different styles of tobaccos which can cater to the needs of different overseas markets. There are several countries in the world whose economy is based on Tobacco like – Brazil, Zimbabwe, Malawi, Thailand, etc. India is, thus, well positioned to become a major player in the global tobacco market if it can harness the emerging opportunities through price competitiveness. However, steep increases in cost of cultivation, transportation and logistics has adversely impacted the price competitiveness of Indian tobacco.
On August 6, 2021, we had the opportunity to digitally participate in the Prime Minister’s interactive session. We were pleased to learn that the government is focusing on exports, with the Ministry of Commerce and Industry setting a target of a 30% growth in Indian tobacco exports. In this regard , we also met with the Commerce Minister and Secretary of the Commerce Ministry, and made our representations and workings through the Tobacco Board. Whereas, tobacco is not included in RoDTEP benefits, despite several appeals.
The tobacco sector’s exports mainly include value-added products, such as flue-cured Virginia (FCV) tobacco (approximately 72% of the country’s FCV production for export) and tobacco products, which bring the country US $ 900 million in foreign exchange each year. As there is no level playing field in the international market, India’s exports of unprocessed tobacco have fallen sharply.
Indian Unmanufactured exports in 2013-14 was worth Rs 4850 Cr with volume of 236 M Kg compared to Rs 3780 Cr with a substantially low volume of 169 M Kg in 2020-21, clearly indicating India’s fall in global markets. It is a loss to the entire FCV tobacco stakeholder community as well as revenue loss to the Indian Government.
The global competitiveness of the Indian tobacco industry has also been severely affected due to factors like
(i) Subsidies provided to tobacco in countries like Zimbabwe, Tanzania, EU, and the USA
(ii) A duty free regime in the EU for imports from least developed countries such as Bangladesh, Nepal, Malawi and so on
(iii) The prevalence of a Tariff Rate Quota in USA whereby the US market is accessible at a concessional import duty rate by countries like Argentina, Brazil, Thailand, etc. while non-quota imports from countries like India are taxed at an ad-valorem rate of 350%.
Consequently, the Indian tobacco sector is denied a level-playing field when competing globally with some of the major tobacco growing countries like USA, Argentina, Mozambique and Zimbabwe.
The stated objective of the Foreign Trade Policy in general, include enhancement of India’s export competitiveness by offsetting infrastructural inefficiencies and associated costs involved in export of goods and products, which are produced in India, especially those having high export intensity and employment potential.
Due to reasons stated above, extension of benefit under RoDTEP to the tobacco sector is eminently aligned to the objectives of the Foreign Trade Policy and also to have a level playing field to our products in the international market – Export incentive will boost the Forex and income generation to farmers.