The Hindu Business Line : Demand for Indian tobacco may rise

THE decline in tobacco production by Zimbabwe and China and phasing out of the subsidy given to tobacco farmers by European Union by 2007-08 would result in an increase in demand for Indian tobacco in the next few years, according to Mr Maddi Lakshmaiah, Managing Director of the Guntur-based ML group.

The company is engaged in tobacco processing and exports and also production of cottonseed oil.

Mr Lakshmaiah told Business Line that on account of the displacement of white farmers from their fields in Zimbabwe in the last couple of few years, the tobacco production by the country had declined from around 230 million kg per annum to 40 million kg at present.

On the other hand, he said, China, a major competitor of India in the international tobacco market, had cut its production from 3,200 million kg to 1,600 million kg and diverted the area to food crops.

Thus, there was a likelihood of China, currently being a net exporter, turning into a net importer of tobacco in future.

Similarly, Mr Laxmaiah envisaged that the European Union's decision to wipe out the subsidy being extended for the cultivation of tobacco crop by 2007-08 would result in a drastic decline in tobacco production in Europe from the current level of 210 million kg a year.

At present, European tobacco farmers are getting as much as $3 as subsidy for production of a kg of tobacco.

Though these factors would pep up the demand for Indian tobacco in future, the Rs 200-crore ML group is diversifying into infrastructure development and also has a proposal to enter into the manufacturing sector.

Mr Laxmaiah said that his group was diversifying into other activities as the Governments world over were discouraging tobacco industry of late.