Hit by rising competition & smuggled cigarettes, Indian tobacco farmers say they have been left in the lurch

Tobacco Board Chairman Yashwanth Kumar Chidipothu

With export market facing tough competition from global players like Zimbabwe and Tanzania, and the domestic market getting flooded with cheap, smuggled cigarettes from across the borders, tobacco farmers find themselves caught between the devil and the deep sea.

They have begun knocking on the Tobacco Board’s doors, seeking its intervention to convince the Union Government to reduce prohibitively expensive taxation, including the Goods and Services Tax (GST) and Excise Duties, which have pushed up cigarette prices by up to 75 per cent.

“I have received several representations from farmers and farmers’ groups. I have brought these issues to Union Commerce Minister Piyush Goyal. We will seek an appointment and take a delegation of farmers from Andhra Pradesh and Karnataka to Delhi and meet the Minister to formally present their demands ahead of the Union Budget,” Tobacco Board Chairman Yashwanth Kumar Chidipothu told businessline.

Empathising with farmers

Yashwanth, who himself is a tobacco farmer, said that he empathised with the farmers’ view that the steep increase in prices of cigarettes could drive the smokers to cheaper, illicit alternatives.

Citing the farmers’ representations, the Chairman said that, as part of the GST 2.0 process, both farmers and industry expected revenue neutrality and believed that the 40 per cent bracket would cover all other taxes (excise duty and cess).

“However, the reintroduction of excise duty has caused significant hardship. Farmers seek a reduction in the newly-imposed excise rates, which he claims are two to three times the revenue-neutral levels,” he said.

The excise duty and NCCD (National Calamity Contingent Duty) were reintroduced (after the GST rejig) at rates ranging from ₹2,050 to ₹8,500 per 1,000 sticks, depending on length.

Encourage smuggling

“Such unexpected and steep increases will have a negative impact on agricultural value chains and are particularly damaging when farmers have already planted, harvested, and brought their crops to auction,” he said.

He wanted the government to reinstate the tax exemption for raw leaf to protect the primary source of income for over 83,000 registered growers.

“Steep and sudden tax increases do not meaningfully reduce consumption; instead, they push consumers toward illegal products. [This] ultimately undermines both public health objectives and national revenue,” he pointed out.

There is a grave fear that high prices will drive consumers to the illicit market. Currently, a legal pack costs roughly ₹340, while smuggled packs are available for as little as ₹50. India is already 4th largest illicit market globally. The Chairman warned that this tax hike will only expand the footprint of smuggled goods that evade taxes and don’t use Indian tobacco.

Export challenges

India is facing stiff competition from African nations such as Zimbabwe, Tanzania, Zambia, Mozambique, Uganda, and Malawi. These countries have significantly lower labour costs and are ramping up production through aggressive contract farming. If Indian tobacco becomes more expensive due to domestic taxes, our export competitiveness will decline, he said.

Published on January 13, 2026