With a shrinking export base and the growing competition from smaller countries, the tobacco industry wants tax benefits to help spur exports.

The Indian Tobacco Association (ITA), which represent 90-95 per cent of tobacco exports, has asked the Union Government to extend benefits under the Remission of Duties and Taxes on Exported Products (RoDTEP) scheme to bail out the industry.

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“We expect at least 5 per cent tax relief from the scheme. We used to get 2-4 per cent in tax relief some time back, but we are left with none,” Maddi Venkateswara Rao, President of ITA, said.

The government came out with a set of refund rates under the RoDTEP scheme.

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Effective from January 1, 2021, the scheme offers remission rates of 0.5 per cent to 4.3 per cent.

Dwindling exports

Tobacco exports fell to ₹3,780 crore in 2020-21 from ₹4,850 crore in 2013-14 as volumes dipped to 169 million kg from 236 million kg during the period.

“This shows how our export revenues have fallen over a period of time,” Rao said.

He attributed the fall to the growing support for the tobacco sector in countries like Zimbabwe, Tanzania and the US, as also the European Union.

He said the country was well positioned to become a major player in global tobacco trade. “But steep increases in the cost of cultivation, transportation and logistics have adversely impacted the price competitiveness of our tobacco sector,” the ITA president said.

He rued that tobacco was not included in the RoDTEP scheme.

Challenges

While some countries offered subsidies to tobacco farmers, which impacted Indian tobacco’s competitiveness, the European Union has extended a duty-free regime for imports from countries like Bangladesh, Nepal, Malawi and others, he pointed out.

“The prevalence of a tariff rate quota in the US is also impacting us. The US market is accessible at a concessional import duty rate by countries like Argentina, Brazil and Thailand while non-quota imports from countries like India are taxed at an ad valorem rate of 350 per cent,” he said.

“Consequently, the Indian tobacco sector is denied a level-playing field when competing globally,” he argued.

The ITA believed that RoDTEP benefits could help the Indian tobacco sector become globally competitive, besides benefiting farmers.

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