The Success Story of Tobacco in India

Tobacco was introduced as a commercial crop in India in the 1930s gradually bringing in a sea of transformation to the lives of the farming community. The success story of tobacco as a cash crop is unlike any other crop grown in India.  In fact, it is the hardy and drought resistant nature of the crop that makes all the difference. Tobacco can even be grown in infertile soil, leaving precious fertile land areas of the country for the cultivation of staple and food crops. Tobacco is grown in 4.64 Lakh hectares of the arable land of this country and ensures prosperous living for the farming community compared with existing rural standards of subsistence living.

FCV tobacco farming in the country received a significant boost with the passage of the Tobacco Board Act in 1975, opening the doors of the Government backed institutional support to the farmers and increasing the prospect of sustainable livelihoods in rural areas of the two FCV-growing States. Nine years later, an organized system for auctioning of FCV tobacco was introduced by the Tobacco Board assuring remunerative pricing of the crop and resulting in consistent increase in FCV tobacco prices.

Tobacco Crop Substitution

Being a regulated crop having institutional support and an organized system of auctioning, Banks also came forward to support tobacco farming by lending required funds to the farmers. Today, the crop enjoys a positive credit system with a 99% loan recovery rate compared with a 50% recovery rate for loans disbursed for the cultivation of other agricultural crops in the country.

The establishment of the Central Tobacco Research Institute (CTRI) by the Government also benefited tobacco farming by promoting cultivation of high-yielding seed varieties and better agricultural practices amongst the farmers, facilitating reduced cost of production and improvement in quality.

As a result, the production of FCV tobacco, used in cigarettes, witnessed consistent growth in volumes from 31.5 Million Kgs. in 1940-41 to 120 Million Kgs. in 1980 and reached its peak with 315 Million Kgs. in 2013-14. As a result, India is now the 2ndlargest producer of tobacco in the world with an estimated overall tobacco production of 800 Million Kgs.

Besides sustaining a small domestic market, the FCV tobacco produced in India is also exported to around 100 countries of the world generating significant foreign exchange earnings for the country. As the quality of Indian tobaccos started meeting international standards, there was a consistent increase in exports of Indian tobaccos predominantly of the FCV variety. While India’s earnings from tobacco exports were worth Rs.102 crores in 1976-77, the same reached Rs. 6,000 crores in 2013-14. India is now among the top five exporters of leaf tobacco in the world with FCV tobacco constituting around 85% of India’s overall leaf tobacco exports.