Introduction
India is the second largest tobacco producer behind China. The country has around 0.45 million hectares of area under tobacco cultivation. About 10% of the total area under tobacco cultivation is in India. Globally, it accounts for 9% of the total tobacco production. The average production for the last 5 years of the country for tobacco crops was around 800 million kg. The country produces various types of tobacco: Flue-cured Virginia tobacco, Country tobacco, Burley tobacco, Bidi tobacco, Rustica tobacco, Hookah, Cigar rapped, Cheroot, Burley, Oriental, Chewing tobacco, etc.
The tobacco industry of India employs about 36 million people in farming, labour activities, manufacturing, processing and export activities. Compared with other tobacco manufacturing countries, India has low production, farming and export cost, making it a popular industry. The Indian manufactured tobacco has an edge over the other tobacco producing countries in terms of lower levels of heavy metals, Tobacco Specific Nitrosamines (TSNAs) and pesticide residues.
India's major tobacco manufacturing states are Gujarat, Andhra Pradesh, Uttar Pradesh, Karnataka, West Bengal, Telangana and Bihar. Out of these Gujarat, Andhra Pradesh and Uttar Pradesh account for around 45%, 20% and 15% of the country's total production respectively. Karnataka accounts for around 8% and rest of the states account for about 2-3% of the country’s total tobacco production.
Tobacco Export Trend
India is the 2nd largest exporter of tobacco behind Brazil. It exports various types of tobacco and tobacco products such as stripped, wholly stemmed, cigar cheroots, smoking tobacco, homogenized, flue-cured, sun-cured, extract and essence, FCV tobacco, unmanufactured tobacco and various tobacco products.
During 2021-22, India exported FCV tobacco amounting to 1.11 lakh tonne. The quantity of total exports in April 2022 was 15,047 tonnes (valued at US$ 52 million), a 61% increase from the same period in the previous year. The value of the total FCV tobacco exports during 2021-22 was Rs. 2,858 crore (US$ 359 million). In the same year, the country exported 27,742 tonne. The exports of the products in April 2022 increased by 55% to 2,501 tonne from April 2021.
The exports of unmanufactured tobacco during 2021-22 was 1.81 lakh tonne. During April 2022 and May 2022, the exports of unmanufactured tobacco increased by 51% and 14%, respectively, over the same period in the previous year. The value of the total exports during the same period was Rs. 4,102 crore (US$ 515 million). During the year 2021-22, India exported tobacco and tobacco products worth a total of US$ 923.8 million.
In February 2022, the export of tobacco from India was US$ 78 million, a 12.78% rise from February 2021. Also, the month on month growth of exports for February 2022 was 20%. From November 2021 to February 2022, tobacco exports in India grew at a CAGR of 7.6%.
Major Markets
India is the only country which produces tobacco in two seasons. It exports to more than 115 countries throughout the world. The country exports tobacco mainly to Belgium, the Philippines, Egypt, Arab Rep., Germany, Nepal, USA, Turkey, Nepal and many more countries worldwide. Out of these countries, Belgium is the biggest importer of tobacco at around 17% of the total exports from India. Egypt, Arab Rep. and the Philippines are one of the largest tobacco export destinations for India importing around 13% and 12% of the total. The country also exports to Indonesia, France, UAE, Russia, Korea, Sri Lanka, Malaysia, Venezuela, Ethiopia and Nigeria.
During 2020-21, India exported US$ 154 million worth of tobacco to Belgium. This was an increase of 3.2% and 14% from 2019-20 and 2018-19, respectively. UAE is among the top importers of tobacco from India, with 2020-21 imports valued at US$ 106.8. The value of exports to Singapore and USA during the same period was US$ 42 million and US$ 32 million, respectively. The exports to USA between 2017-18 and 2020-21 grew at a CAGR of 9.8%. Some of India's other tobacco export destinations, i.e. Netherlands and Germany, imported US$ 15 million and US$ 12.6 million worth of tobacco from India during 2020-21, respectively.
Government Initiatives
In 2022, the government of India approved the extension of Interest Equalization Scheme (IES) till 2024. The rates for IES have been revised as 3% for MSMEs (tobacco products have MSME registration) and 2% for manufacturers and merchant exporters.
Duty Draw Back Scheme
The goal of the scheme is to cut the duty and tax chargeable on imported products that will be used to manufacture exported goods from India. Under this scheme, the unmanufactured tobacco, cigars, cheroots, cigarettes, manufactured tobacco, products containing tobacco, reconstituted tobacco, nicotine, tobacco substitutes, etc. will receive a 0.15% drawback rate.
Interest Equalization Scheme (IES)
The scheme originally came into effect in 2015 and has received an extension till 2024. The interest equalization will be provided pre and post shipment Rupee export credit. As per the extension, the rates for IES will be 3% for MSMEs, 2% for manufacturers and merchant exporters of 410 tariff specified lines.
Tobacco Growers Welfare Scheme
The scheme is aimed at welfare of the FCV tobacco growers and their dependent families. A Tobacco Board’s Growers’ Welfare Fund has been approved by the Ministry of Commerce and Industry of India under this scheme. The total corpus approved is Rs. 25 crore (US$ 3.14 million).
Governing Bodies
Tobacco Board
The Tobacco Board was formed in 1976 and is headquartered in Andhra Pradesh. The board is a facilitator to the tobacco growers, traders and exporters. The functions of the board are the promotion of all categories of tobacco and allied products, overseeing the production and distribution of the products for domestic as well as exports and regulating the Flue-cured Virginia (FCV) tobacco. Some of the other roles of the Tobacco board are advising the central government, propagating information, sponsoring and encouraging scientific and technological research related to tobacco promotion.
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