The Federation of All India Farmer Associations (FAIFA), representing tobacco and other commercial crop farmers, on Thursday urged Finance Minister Nirmala Sitharaman to adopt a pragmatic approach to cigarette taxation, as it could boost smuggling of illegal cigarettes, hitting the livelihoods of millions of tobacco farmers and farm workers.

The Budget has raised the national calamity contingent duty (NCCD) on cigarettes by Rs 200-Rs 735 per thousand sticks, depending upon the length of the cigarette and whether it is filtered or non-filtered.

“This tax increase will provide a further boost to the smuggled cigarette trade and depress domestic demand, resulting in weak demand in ensuing auctions. Higher taxation, the availability of smuggled, illicit and contraband cigarettes, along with one-sided WHO regulations, has seen FCV tobacco production decline to 210 million kg in 2019-20 from 325 million kg in 2013-14, resulting in a loss of more than Rs 5,000 crore (cumulative) to the farming community, FAIFA president Javare Gowda said in a statement.

The market for illicit cigarettes doubled to 26.5 billion sticks in 2018 from 12.5 billion sticks in 2005, making India the fourth largest and fastest growing illegal cigarette market in the world. At current tax rates, it is estimated that the government loses Rs 13,000 crore in revenues per annum on account of the illegal cigarette trade, he added.

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