The Federation of All India Farmer Associations (FAIFA), which represents farmers and farmworkers of commercial crops, has asked the Union Government to not hike taxes on cigarettes any further.

“Any further increase in taxes would lead to a severe reduction in FCV cultivation and impact the livelihoods of thousands of farmers,” the federation has said.

High rates of taxes have fuelled smuggling of illegal cigarettes from across the borders, resulting in huge losses to the exchequer. Quoting the FICCI CASCADE’s study, it said the total loss to the economy because of cigarette smuggling stood at ₹16,138 crore.

The federation said the volume of illicit cigarettes grew by 44 per cent to 28.1 billion sticks in 2020 from 19.5 billion sticks in 2011.

As a result, the share of illicit cigarettes in the country has gone up to 27.6 per cent in 2020 from 21.3 per cent in 2015.

This has resulted in a drop of demand for FCV (flue-cured Virginia) tobacco, which in turn has adversely impacted the tobacco crop area and production.

The production fell by 39 per cent to 194 million kg a year in 2021-22 from 316 million in 2013-14. “A reduction of one lakh hectares in tobacco crop area during the period has resulted in loss of 35 million man-days of employment,” it said.

The acreage in India dropped to 1.22 lakh hectares in 2020-21 from 2.21 lakh hectares.

High taxation

The federation said that the cost of cigarettes is among the highest in the world because of a very high rate of taxation.

“Reduced interest on legal cigarettes is impacting the interests of farmers. Given that India has a huge and widespread dependence on the tobacco crop for livelihood, the government must bring a price parity between cigarettes and other forms of tobacco to check the illicit cigarettes market,” Gadde Seshagiri Rao, Ex-Vice Chairman, Tobacco Board and Vice-President of FAIFA, said in a statement.

“The government’s approach to make cigarettes unaffordable by high taxation policy in order to discourage its consumption has put the livelihood of FCV tobacco farmers at risk,” Murali Babu, General Secretary of the federation, said.

He claimed that there was no clear evidence to show that there was a decline in tobacco consumption because of high rates of taxation.