Introduction
India is the second largest tobacco producer after 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 estimated production of tobacco crops has been 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 45.7 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. 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 the rest of the states account for about 2-3% of the country’s total tobacco production.
Tobacco Export Trend
India is the second largest exporter of tobacco behind Brazil. It exports various types of tobacco and tobacco products such as stripped, wholly stemmed, cigar cheroots, smoking tobacco, homogenised, flue-cured, sun-cured, extract and essence, FCV tobacco, unmanufactured tobacco, and various tobacco products.
From April 2023 –December 2023 India exported 110,361 tonnes of FCV tobacco valued at Rs. 4,524 crore (US$ 547 million).
The exports of unmanufactured tobacco during April 2023 – December 2023 were 220,873 tonnes valued at Rs. 6,808 crore (US$ 823 million).
During the year 2023-24 (until February 2024), India exported tobacco and tobacco products worth a total of US$ 1328.20 million.
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, UAE, Indonesia, Russian Federation, Egypt, USA and many more countries worldwide. In 2023-24 (until February 2024) Out of these countries, Belgium is the biggest importer of tobacco at around 19.58% of the total exports from India. UAE and Indonesia are one of the largest tobacco export destinations for India importing around 19.16% and 6.21% of the total. The country also exports to Indonesia, France, Russia, Korea, Sri Lanka, Malaysia, Venezuela, Ethiopia, and Nigeria.
During 2022-23, India exported US$ 243.3 million worth of tobacco to Belgium. This was an increase from US$ 164.8 million in 2020-21. UAE is among the top importers of tobacco from India, with 2022-23 imports valued at US$ 176.1 million. The value of exports to Singapore and the US during the same period was US$ 44.5 million and US$ 38.5 million, respectively. Some of India's other tobacco export destinations, i.e., Netherlands and Germany, imported US$ 9 million and US$ 11.5 million worth of tobacco from India during 2022-23, respectively.
Government Initiatives
In 2022, the government of India approved the extension of the 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, 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, and 2% for manufacturers and merchant exporters of 410 tariff-specified lines.
Tobacco Growers Welfare Scheme
The scheme is aimed at the 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 include 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, and sponsoring & encouraging scientific and technological research related to tobacco promotion.
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