Market Survey By: A. Kumaresan
TOBACCO EXPORTS: THE UNTAPPED POTENTIAL In spite of the health hazards of smoking and chewing tobacco, this agri-product is poised to grow at 1.9 per cent annually, globally. In India, tobacco gains commercial importance because of the employment it provides and the revenue it generates for the Indian economy, especially through exports.
T
obacco is an agro-based arresting the migration of rural laproduct processed from bour to urban centres. the fresh leaves of plants Although there is a nation-wide of the genus ‘Nicotiana.’ anti-tobacco campaign, the commerIt is widely available for cial importance of tobacco can never sale in the dried and cured form, and be underestimated due to its revis often smoked. It can also be chewed enue-earning potential and employor inhaled (as with powdered snuff). ment generation capacity. Tobacco occupies a prime place in Botanically, the tobacco plant bethe Indian economy on account of longs to the family Solanacea and the its considerable contribution to the genus Nicotiana. The genus embracagricultural, industrial and export sectors. India is currently the world’s second largest producer of tobacco next to China, and the fourth largest exporter of unprocessed tobacco in the world. Tobacco, being a labour intensive crop, provides employment to more than 60 lakh people who are engaged in farming, curing, redrying, packaging, grading, manufacturing, distribution, export and retailing activities. The beedi industry, which provides employment to around 44 lakh essentially unskilled rural folk, and mostly women, is partly responsible for Tobacco plantation
es over 60 species of which two alone are cultivated. India grows both— Nicotiana tabacum and Nicotiana rustica. The largest area is under Nicotiana tabacum, which is grown all over the country, while Nicotina rustica is confined to the northern and north-eastern states, i.e., Uttar Pradesh, Bihar, West Bengal and Assam. The cultivation of Nicotiana tabacum accounts for more than 80 per cent of the foreign exchange earnings.
Tobacco growing states Even though the cultivation of tobacco is spread all over the country, it is concentrated in states like Andhra Pradesh, Karnataka, Gujarat, Maharashtra, Bihar, Tamil Nadu and West Bengal, etc. Cigarette tobacco is mostly cultivated in Andhra and Karnataka, whereas beedi tobacco is grown in Gujarat, Karnataka and Maharastra. Cigar and cheroot tobacco are grown in Tamil Nadu, Andhra Pradesh and
Market Survey Table I
India’s Export of Unmanufactured Tobacco and Tobacco Products During 2002-03 to 2007-08 Year
Unmanufactured tobacco Quantity Value Value (tonnes) (Rs crore) (US$ mn)
Tobacco products Qty Value Value (tonnes) (Rs crore) (US$ mn)
Qty (tonnes)
Total Value (Rs crore)
Value (US$ mn)
2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
107,715 128,186 138,159 142,007 152,618 174,690
19,842 22,776 24,774 24,862 28,370 30,657
127,557 150,962 162,933 166,869 180,988 205,347
1,095.95 1,175.63 1,362.18 1,413.47 1,723.42 2,022.78
224.95 251.04 305.77 322.49 381.54 502.67
770.62 825.48 968.90 1,027.52 1,241.05 1,478.51
158.17 176.27 217.49 234.43 274.75 367.42
325.33 350.15 393.28 385.95 482.37 544.27
66.78 74.77 88.28 88.06 106.79 135.25
Source: The Tobacco Board, Ministry of Commerce, Government of India
Table II
India’s Export of Unprocessed Tobacco to Major Countries During 2005-06 to 2007-08 (Value in Rs crore) Country
2005-06
2006-07
2007-08
Percentage increase in 2007-08 over 2006-07
Belgium Russia Philippines Germany Korea Netherlands South Africa UK Vietnam Egypt Nepal USA Ukraine France Australia Yemen Poland Singapore Bangladesh Others Total
146.30 179.31 32.60 62.75 14.05 44.82 16.71 61.20 60.23 46.08 30.45 11.17 36.43 26.05 26.37 27.35 21.72 40.45 24.43 119.04 1,027.52
198.32 138.90 93.88 79.66 23.90 51.10 39.92 68.69 41.76 61.13 34.21 25.23 27.40 16.90 20.91 27.57 28.51 48.93 16.63 197.49 1,241.05
220.67 127.50 118.61 106.99 61.84 81.49 71.18 56.34 61.36 44.12 37.99 23.86 28.96 17.88 45.37 14.58 27.60 22.53 16.33 293.31 1,478.51
11.26 (–) 8.20 26.34 34.30 158.74 59.47 78.30 (–) 17.97 46.93 (–) 27.82 11.04 (–) 5.43 5.58 5.79 116.97 (–) 47.11 (–) 3.19 (–) 53.95 (–) 1.80 48.51 19.13%
Source: The Tobacco Board, Ministry of Commerce, Government of India
West Bengal, and chewing tobacco is grown in Tamil Nadu, Gujarat, Bihar, West Bengal and UP. Hookah tobacco is grown in UP and West
Bengal. Out of the total production, only 19 per cent goes into the manufacturing of cigarettes, whereas 81
per cent is consumed for chewing, making beedis, snuff, gutkha paste, jarda, hookah paste, etc.
Government initiatives In case of FCV (Flue Cured Virginia) tobacco, the government of India and the Tobacco Board announce a Minimum Support Price (MSP) from year to year with the objective of protecting the interests of the growers of FCV tobacco. There is a need to establish an organised marketing system for all types of tobacco so that Indian tobacco can achieve a significant share in the international market.
The tobacco industry: An overview The tobacco industry in India contributes in a unique manner to several important facets of the Indian economy, covering revenue, export, employment, and GDP growth. It mainly involves the manufacture of cigarettes, beedis, cigars and cheroots, hookahs, snuff and other chewing tobacco like zarda, gutkha and paan masala. The cigarette industry in India is essentially capital intensive in nature. The growth of this industry, both in India and abroad, represents
Market Survey Table III
India’s Region-wise Exports of Unprocessed Tobacco During 2005-06 to 2007-08 (Quantity in tonnes; value in Rs crore) Region
2005-06 Quantity Value
2006-07 Quantity Value
2007-08 Quantity Value
West Europe East Europe Middle East South & South East Asia Africa North & South Americas Australasia Total
43,213 40,167 31,656 12,618 7,917 4,192 2,244 142,007
48,049 31,805 10,652 32,893 20,743 6,530 1,946 152,618
57,559 31,365 9,698 44,408 19,234 8,542 3,884 174,690
361.20 263.42 224.24 91.77 42.55 17.12 27.21 1,027.52
448.27 227.10 50.96 285.72 166.13 40.78 22.09 1,241.05
535.44 243.32 56.97 377.41 164.37 54.21 46.79 1,478.51
Percentage increase in 2007-08 over 2006-07 Quantity Value 19.79 (–) 1.38 (–) 8.95 35.00 (–) 7.27 30.81 99.58 14.46%
19.44 7.14 11.79 32.09 (–) 1.05 32.93 111.81 19.13%
Source: The Tobacco Board, Ministry of Commerce, Government of India
a big revenue opportunity for the economy. The beedi industry is one of the foremost cottage industries in India. Around 37 per cent of the tobacco produced in India goes into beedi making as per an Indian Market Research Bureau (IMRB) report in 1996. The social significance of the beedi industry is that it generates more employment compared to the cigarette industry. From the beginning of the 17th century, tobacco has been playing an important role in international trade. Recently, there has been a worldwide anti tobacco campaign, which resulted in modest drop in the area under cultivation and in the production of tobacco. But consumption of tobacco in the world has remained more or less stable.
The adverse effects of tobacco Tobacco use most commonly leads to diseases affecting the heart and lungs, with smoking being a major cause of heart attacks, strokes, chronic obstructive pulmonary disease (COPD), emphysema, and cancer (particularly lung cancer, cancers of the larynx and mouth, and
pancreatic cancer). The World Health Organisation estimates that tobacco caused 5.4 million deaths in 2004 and 100 million deaths over the course of the 20th century.
About the Tobacco Board
Table IV
India’s Exports of FCV Tobacco During 2002-03 to 2007-08 Year
Quantity (tonnes)
Value (Rs crore)
Value (US$ million)
2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 Per cent change in 2007-08 over 2006-07
74,169 99,183 105,417 109,575 120,300 137,779
619.37 702.31 818.12 857.90 1,060.57 1,242.14
127.13 149.97 183.64 195.73 234.79 308.68
14.52%
17.12%
31.47%
Source: The Tobacco Board, Ministry of Commerce, Government of India
The government of India established the Tobacco Board under an Act of Parliament in 1975 with a view to bring about the all-round development of the tobacco industry with effect from 1st January 1976. Its headquarters are at Guntur, Andhra Pradesh. The Tobacco Board undertakes the following export promotion activities: 1. Inviting official and business delegations from abroad. 2. Organising visits of Indian official and trade delegations abroad. 3. Participation in internation-
al trade fairs, and exclusive world tobacco exhibitions and symposiums. 4. Publicity through an extensive advertisement campaign in the international media to promote Indian tobacco. 5. Dissemination of information and various enquiries received from overseas customers to the exporters. 6. Problem solving with government agencies and organisations—RBI, customs; import/export procedures; problems with importers through Indian missions abroad, etc.
Market Survey Table V
India’s Export of FCV Tobacco to Major Countries During 2005-06 to 2007-08 (Quantity in tonnes; value in Rs crore) Country
2005-06 Quantity Value
2006-07 Quantity Value
2007-08 Quantity Value
Belgium Russia Philippines Germany Netherlands Vietnam Korea UK South Africa Egypt Australia Nepal UAE Poland Ukraine Indonesia Singapore Brazil total (incl. others)
13,879 20,593 3,096 5,935 3,112 7,084 4,994 7,662 987 5,467 1,917 4,171 868 2,714 5,144 366 3,646 — 109,575
16,728 16,234 8,946 6,546 3,119 3,977 4,581 7,049 4,198 7,371 1,466 4,320 2,290 2,794 3,339 171 4,857 1,140 120,300
18,632 13,011 12,043 8,680 5,605 6,153 8,968 6,469 4,200 4,446 3,150 4,460 2,959 2,765 3,923 2,057 2,836 1,949 137,779
133.69 141.73 31.42 58.74 32.53 56.45 13.89 61.08 6.50 44.38 23.80 26.19 4.41 18.40 33.62 2.55 36.25 — 857.90
178.04 115.96 91.85 69.72 34.41 41.48 21.61 65.56 35.68 57.67 17.06 29.99 17.13 23.24 25.20 0.35 47.71 10.97 1,060.57
194.06 103.54 110.61 95.75 59.99 59.86 59.27 54.89 42.36 40.31 39.28 33.31 26.12 25.01 23.91 21.71 21.68 20.80 1,242.14
per cent increase in 2007-08 over 2006-07 8.99 (–) 10.71 20.42 37.33 74.33 44.31 174.27 (–) 16.27 18.72 (–) 30.10 130.24 11.07 52.48 7.61 (–) 5.11 6,102.85 (–) 54.55 89.60 17.12%
Source: The Tobacco Board, Ministry of Commerce, Government of India
Activities of the Board Soil and water testing. 1. The Board had established two soil testing labs—one at Ongole in AP and another at Periyapatna in Karnataka state. The Board also avails the services of soil testing labs of the state governments in AP and Karnataka, whenever required. 2. The Board organises the collection and analysis of soil and water samples of growers, free of cost. 3. It advises concerned growers about the correct dose of fertilisers and requirements for irrigation. Insurance facilities. The Tobacco Board facilitates group personal accident policies and barn insurance policies for the registered
tobacco growers of Andhra Pradesh, Karnataka, Maharastra and Orissa, at competitive rates. Financing tobacco growers. The Board helps get crop loans from banks and helps banks in recovery by routing sale proceeds through the concerned banks. It arranges additional loans at about 7 per cent interest rate from nationalised banks for procuring inputs like coal, fertilizer, etc. It has organised the setting up of four ATMs in different places of West Godavari district by ICICI bank, which is extending crop loans and input loans at 7 per cent interest to growers, through these ATMs. Trade participation in crop development. The Tobacco Board had successfully roped in some in-
ternational tobacco merchants and domestic manufacturers to take up low productivity areas for agronomical development with a view to improving quality and thus promoting exports. Awards to growers. The Tobacco Board honours the best growers for achieving higher yields every year as a step towards inculcating a spirit of competition among them.
Export of tobacco India’s export of unprocessed tobacco and tobacco products from 2002-03 to 2007-08 is clearly shown in Table I. The export of raw tobacco from India in terms of volume shows a steady growth from 1,52,618 million tonnes in 2006-07 to 1,74,690 mil-
Market Survey Table VI
Break-up of India’s Export (Variety wise) of Non-FCV Tobacco During 2005-06 to 2007-08 (Quantity in tonnes; value in Rs crore) Variety
Quantity
2005-06 Value
Quantity
2006-07 Value
Quantity
2007-08 Value
Flue Cured Virginia Burley Sun Cured Natu Top leaf/Jutty Lal Chopadia Judi Others Total
109,575 16,632 3,094 2,983 6,131 1,184 2,408 142,007
857.89 94.75 11.98 12.31 31.62 3.86 15.11 1,027.52
120,300 15,744 3,047 2,322 7,159 1,019 3,027 152,618
1,060.57 103.48 13.64 9.99 26.64 3.37 23.36 1,241.05
137,779 19,622 4,339 2,201 5,337 0 5,412 174,690
1,242.14 143.58 20.96 9.45 17.51 0 44.87 1,478.51
Source: The Tobacco Board, Ministry of Commerce, Government of India
Table VII
India’s Segmentwise Export of Tobacco Products During 2005-06 to 2007-08 (Quantity in tonnes; value in Rs crore) Segment Cigarettes Cut Tobacco Chewing Tobacco Hookah Tobacco Paste Bidis Snuff Cigars Total
2005-06 Quantity Value 5,885 2,506 5,739 9,930 694 108 — 24,862
119.24 23.89 171.27 37.37 32.92 1.26 — 385.95
2006-07 Quantity Value 6,424 4,229 5,953 10,594 1,079 87 4 28,370
148.39 52.55 198.48 42.38 39.08 1.39 0.10 482.37
2007-08 Quantity Value 5,833 4,680 8,338 10,656 1,003 147 — 30,657
145.14 54.82 252.95 45.70 44.22 1.44 — 544.27
Percentage of increase in 2007-08 over 2006-07 (–) 2.19 4.31 27.44 7.83 13.15 3.59 — 12.83%
Source: The Tobacco Board, Ministry of Commerce, Government of India
lion tonnes during 2007-08. The rupee value of unprocessed tobacco has increased from Rs 1241.05 crores to Rs 1478.51 crores. In terms of US$ million, it has reached US$ 367.42 million in 2007-08 as against US$ 274.75 million in the previous year The volume of tobacco products exported from India also shows a high growth from 28,370 million tonnes in 2006-07 to 30,657 million tonnes during 2007-08. The rupee value of tobacco products has also increased from Rs 482.37 crores to Rs 544.27 crores. In dollar terms, it has reached US$ 106.79 million as against US$
135.25 million in the previous year. India’s export of unprocessed tobacco to major countries during 200506 to 2007-08 is shown in Table II. It shows that Belgium and Russia continued to be the largest market for Indian unprocessed products in terms of rupee value. Exports to Russia during 2007-08 registered a marginal decline of 8.20 per cent. Major countries to which Indian tobacco exports increased during the year are the Philippines (26.24 per cent), Germany (34.30 per cent), Korea (158.74 per cent), Netherlands (59.47 per cent), South Africa (78.30 per cent), Viet-
nam (46.93 per cent), Nepal (11.04 per cent), Ukraine (5.58 per cent), France (5.79 per cent), and Australia (116.97 per cent) respectively. Countries to which exports dropped are the UK (17.97 per cent), Egypt (27.82 per cent), USA (5.43 per cent), Yemen (47.11 per cent), Poland (3.19 per cent), Singapore (53.95 per cent) and Bangladesh (1.80 per cent). Region-wise export trends clearly show that West Europe has mainly accounted for the increased export of unprocessed tobacco in terms of quantity and also in terms of value.
Market Survey Table VIII
India’s Category wise Export of Tobacco Products to Major Markets During 2005-06 to 2007-08 (Quantity in tonnes; value in Rs crore) Category/country Cigarettes USA UAE Saudi Arabia Philippines Qatar Kuwait Singapore Egypt Bahrain Romania West Africa Iraq Turkmenistan Total (incl. others) Cut tobacco UAE Yemen Cambodia Iraq Cyprus USA Singapore Total (incl. others) Chewing tobacco UAE Afghanistan USA Yemen Saudi Arabia Singapore Malaysia Iran Tanzania UK Total (incl. others) Hookah tobacco paste Saudi Arabia France
2005-06 Quantity Value
2006-07 Quantity Value
2007-08 Quantity Value
Per cent change in 2007-08 over 2006-07
1,273 2,032 296 — 73 134 — — — 920 95 411 44 5,885
37.58 32.56 8.79 — 1.79 4.02 — — — 12.44 1.89 6.55 0.54 119.24
1,441 2,080 427 110 157 222 99 145 85 449 218 293 129 6,424
48.89 39.83 11.83 4.05 4.59 6.64 2.19 3.12 2.69 5.85 4.85 3.41 2.28 148.39
1,386 1,221 709 332 196 204 304 182 93 145 48 24 104 5,833
45.72 24.39 17.63 11.22 6.56 6.26 6.14 3.33 3.07 1.85 1.07 0.27 1.13 145.14
(–) 6.48% (–) 38.76% 49.02% 177.03% 42.91% (–) 5.72% 180.36% 6.73% 14.12% (–) 68.37% (–) 77.93% (–) 92.08% (–) 50.43% (–) 2.19%
1,888 53 102 239 — 51 05 2,506
12.56 0.76 1.54 6.29 — 0.93 0.07 23.89
1,675 835 406 480 — 135 307 4,229
15.22 12.61 6.15 5.62 — 4.00 4.48 52.55
1,685 481 463 492 490 142 274 4,680
16.36 6.22 6.10 5.30 4.92 4.18 3.62 54.82
7.49% (–) 50.67% (–) 0.81% (–) 5.69% — 4.5% (–) 19.19% 4.31%
3,143 93 59 686 79 — 262 867 296 155 5,739
90.27 6.64 4.98 10.06 6.68 — 5.04 22.19 6.33 12.33 171.27
3,096 372 112 736 334 44 284 405 277 — 5,953
106.85 15.69 8.61 10.47 12.23 4.60 4.74 10.19 5.53 — 198.48
5,004 1293 207 623 281 66 333 — — — 8,338
150.02 41.06 17.83 8.26 7.43 6.91 5.29 — — — 252.95
40.40% 161.69% 107.08% (–) 21.10% (–) 39.24% 50.21% 11.60% — — — 27.44%
9,645 70
36.08 0.53
10,217 207
39.75 1.58
10,020 103
36.37 1.51
(–) 8.50% (–) 4.43% Continued on next page...
Market Survey Continued from previous page...
Category/country South Africa UAE Brazil USA Yemen Total (incl. others) Bidis UAE Afghanistan USA Iran Yemen Singapore Total (incl. others)
2005-06 Quantity Value
2006-07 Quantity Value
2007-08 Quantity Value
Per cent change in 2007-08 over 2006-07
— — — 03 185 9,930
— — — 0.04 0.45 37.37
— — — 19 139 10,594
— — — 0.51 0.42 42.38
79 181 64 — — 10,656
1.51 1.29 1.14 — — 45.70
— — — — — 7.83%
335 76 33 55 66 53 694
17.81 1.92 1.63 1.52 5.83 1.48 32.92
757 45 64 57 21 49 1,079
23.16 1.31 3.14 1.59 4.76 2.03 39.08
704 110 51 47 07 35 1,003
31.71 3.47 2.90 1.42 1.35 1.33 44.22
36.91 164.88% (–) 7.64% (–) 10.69% (–) 71.63% (–) 34.48% 13.15%
Source: The Tobacco Board, Ministry of Commerce, Government of India
Other regions registering a significant growth during the period comprise Eastern Europe (7.14 per cent), Middle East (11.79 per cent), South & South East Asia (32.09 per cent), North & South America (32.93 per cent) and Australasia (111.81 per cent), respectively. On the other hand, the African region shows a decline of 1.05 per cent.
FCV—Flue-Cured Virginia Tobacco Exports of FCV tobacco from India in terms of quantity have increased from 120,300 million tonnes in 2006-07 to 137,779 million tonnes during 2007-08. In terms of rupee value, it has increased from Rs 1060.57 crores to Rs 1242.14 crores, respectively. In terms of the dollar value, it has reached US$ 308.68 million as against US$ 234.79 million in the previous year. Export details of FCV tobacco from 2002-03 to 2007-08 are represented in Table IV, which show a marginal growth of 14.52 per cent in terms of quantity, 17.12 per cent in terms of rupee
value and 31.47 per cent in terms of US$ value during 2007-08. Table V shows that Belgium and Russia continued to be the largest market for India’s FCV tobacco products in terms of quantity and rupee value. Export to Russia during 200708 registered a marginal decline of 10.71 per cent. Major countries to which exports grew are the Philippines (20.42 per cent), Germany (37.33 per cent), Korea (174.27 per cent), Netherlands (74.33 per cent), South Africa (18.72 per cent), Vietnam (44.31 per cent), Nepal (11.07 per cent), UAE (52.48 per cent), Poland (7.61 per cent), Indonesia (6102.85 per cent), Brazil (89.60 per cent) and Australia (130.24 per cent), respectively. On the other hand, countries such as UK (16.27 per cent), Egypt (30.10 per cent), Ukraine (5.11 per cent) and Singapore (54.55 per cent) showed a declining trend during the year 2007-08. Table VI shows the export breakup of non-FCV tobacco. During 200708, the export of Flue Cured Virginia, Burley, and Sun Cured Natu showed an increase in terms of quantity and
in terms of rupee value, compared to the previous year 2006-07. During 2007-08, the export volumes of Top leaf/Jutty and Lal Chopadia’s had decreased to 2201 tonnes from 2322 tonnes, and 5337 tonnes from 7159 tonnes, compared to 2006-07. During 2007-08, a decreasing trend is seen in the Judi variety in terms of quantity and value. Chewing tobacco continued to be the single largest segment for exports in terms of value (252.95) and shows an increase of 27.44 per cent in 2007-08. There is a fall in cigarette exports from 6424 tonnes in 2006-07 to 5833 tonnes in 2007-08. Cut tobacco has registered a growth in exports from Rs 52.55 crores to Rs 54.82 crores during 2007-08. The other segments, such as hookah tobacco paste, beedis and snuff are also showing an increase, both in terms of quantity and value. India’s category wise export of tobacco products to major markets during 2005-06 to 2007-08 is shown in Table VIII. Exports of cigarettes during 2007-08 have declined by 2.19 per cent in terms of rupee value over the
Market Survey previous year. The major markets for cigarettes are USA, UAE, Saudi Arabia, Philippines and Singapore, where the demand for generic lowcost cigarettes is growing. Cut tobacco exports during 2007-08 increased by 4.31 per cent in terms of rupee value, over 200607. UAE (1685 tonnes), Yemen (481 tonnes), Iraq (492 tonnes), Cyprus (490 tonnes) and Cambodia (463 tonnes) are major importers of Indian cut tobacco. Exports of chewing tobacco increased by 27.44 per cent in value terms in 2007-08 as against the exports of 2006-07. More than 50 countries have imported these products from India. Major importers are UAE, Afghanistan, Yemen, USA, Nepal, Saudi Arabia and Malaysia. Iran and Tanzania have imposed ban on imports of Indian chewing tobacco
on health grounds, which resulted in zero exports to these countries. The export of hookah tobacco paste increased by 7.83 per cent in value terms over the previous year. Major markets for this product are Saudi Arabia, France and UAE. Hookah tobacco paste exports are getting diversified as Brazil and South Africa are emerging as potential customers. Beedi exports in 2007-08 increased by 13.15 per cent in terms of value. Major export destinations are UAE, Afghanistan, USA, Iran and Singapore. The export of snuff is in the order of 147 tonnes, valued at Rs 1.44 crores, in 2007-08 against 87 tonnes exported in 2006-07. China is the major market (46 tonnes) for Indian snuff, accounting for 31 per cent of the total exports. Saudi Arabia,
UAE, Yemen and USA are other important markets.
Future export prospects As per the projection by F.A.O, the global tobacco industry is poised to increase at the rate of 1.9 per cent annually. Assets such as an experienced farming community confer a significant competitive advantage to India. With an increase in the world import requirements translating into a rise in export potential, the Indian tobacco industry has significant opportunities to consolidate and extend its position in the global market.
The author is a lecturer in the Department of Commerce & International Business, at Dr G.R. Damodaran College of Science, Coimbatore