Tobacco farmers in Karnataka are worried over the proposal to increase tax on cigarette and the resultant impact on their livelihood.
“Karnataka tobacco farmers are concerned on the recommendations of Union Ministry of Health for steep increase in tax on cigarette in the forthcoming budget,” BV Javare Gowda, President, the Federation of Karnataka Tobacco Growers Association, told Business Line.
About one lakh small and marginal farmers in Mysore, Hassan and Chamrajnagar districts of Karnataka are dependent on Flue Cured Virginia (FCV) tobacco crop for their livelihood.
Apart from growers, nearly 10 lakh farm workers are dependent on this rain-fed commercial crop. “FCV tobacco in Karnataka is grown under rain-fed conditions and that too in low fertile soils. Farmers in this region do not have any other remunerative alternative crop,” said Gowda.
“Whenever news of increase in taxation and ban on the crop comes up, we (farmers) feel this kind of information or decisions will jeopardise the prospects of thousands of small and marginal farmers,” Gowda added.
He further said that during extreme weather conditions as being experienced this year and also during crop year 2011-12, FCV was the only crop that gave returns to the farmers.
TaxationT Vikram Raje Urs, Secretary of the Association, explaining the impact of cigarettes taxation and its impact on farmer livelihood, said, “Domestic cigarette industry normally buy more than 50 per cent of the tobacco on the auction platforms and plays supportive role in ensuring remunerative prices to the farmers in view of fluctuating export demand.” Further cigarettes accounts to just 15 per cent of total tobacco consumed in India and the rest accounts for beedies, chewing tobacco, Khini, etc.
“Indiscriminate increase of excise duty on cigarettes will ruin farmers’ livelihood. Reduction in legal cigarette production will reduce the tobacco purchases of domestic manufacturers, impacting market prices for farmers also due to abnormal increase in excise duty, illicit cigarette in India has been growing enormously and is now the 5th largest smuggled cigarette market in the World,” explained Urs.
Forex earningTobacco grown in Karnataka is a major foreign exchange earner. Although tobacco crop is grown on less than 0.3 per cent of cultivable land, tobacco and tobacco products generate excise duty and State taxes to the tune of ₹28,000 crore annually.
The tobacco exports earn more than ₹6,000 crore foreign exchange and out of that FCV tobacco alone contributes ₹4,000 crore. Andhra Pradesh and Karnataka together produce around 270 million kg of FCV tobacco and Karnataka produces about 100 million kg.