FCV Tobacco Farmer Delegation Led by Purandeswari, MP Meets Finance Minister Seeking Review of Tobacco Tax Hike
New Delhi: A delegation of FCV tobacco farmers from Andhra Pradesh, Telangana and Karnataka, led by Smt. Daggubati Purandeswari, Hon’ble Member of Parliament from Rajahmundry, along with Shri Yashwanth Kumar Chidipothu, Chairman, Tobacco Board, met Smt. Nirmala Sitharaman, Hon’ble Union Finance Minister, this afternoon to express serious concerns over the recent tax hike and its likely adverse impact on the regulated FCV tobacco ecosystem and farmers’ livelihoods.
Hon’ble MP Smt. Purandeswari initiated the discussion and explained that the sudden increase in taxation would create severe distress for lakhs of farming families dependent on FCV tobacco cultivation and disrupt the regulated marketing system. She highlighted the possible revenue loss to the Government due to decline in legal trade, and the serious risk of illicit trade expansion, which could undermine national revenue as well as enforcement efforts. She also emphasized the need to protect domestic industry by ensuring stable availability and usage of low-grade tobacco, which is crucial for sustaining farmer incomes, auction stability and overall demand.
Shri Yashwanth Kumar Chidipothu, Chairman, Tobacco Board, explained in detail the repercussions of the tax hike on auctions, buyer participation, trade confidence, and the overall functioning of the regulated FCV tobacco. He further emphasised that although the tax hike is being projected as a “revenue-neutral” measure, it has come as a major policy shock to farmers and the regulated sector, as the notified rates, effective from 1st February, will sharply increase the tax incidence on legal cigarettes by around 73%, making it 2 to 3 times higher, and thereby adding severe pressure on legal demand and the auction-based FCV ecosystem.
He cautioned that weakened buyer participation could directly affect auction competitiveness, resulting in lower prices and higher unsold stocks, ultimately impacting farmer livelihoods and the entire value chain.
During the meeting, farmers from Andhra Pradesh and Telangana informed that the crop is ready and auctions are expected to commence from next month. They expressed deep concern that the tax hike may drastically reduce domestic consumption, leading to sharp price declines, accumulation of unsold stocks, and reduced buying interest from traders. They also warned that sudden tax shocks historically encourage illegal and smuggled products, and cited the example of South Africa where legal factories reportedly shut down as illicit trade expanded to nearly 75% of the market.
Farmers from Karnataka explained that auction prices have already declined by nearly 10% and they have received information that from 1st February onwards, traders may not participate due to the 18% tax on unmanufactured tobacco. They cautioned that if buyer participation reduces further, the auction system will be severely affected and farmers will face heavy losses.
Hon’ble Finance Minister Smt. Nirmala Sitharaman listened carefully to all concerns and responded positively, assuring that the Government will look into the issues, review the concerns, and consider the points raised by the farmers and stakeholders. She also assured that the Government’s approach will be revenue-neutral, while taking into account the impact on farmers, trade and the regulated ecosystem, and further stated that the Government is not looking to generate additional revenue from the tobacco sector.
Smt. D. Purandeswari, Hon’ble MP further assured the delegation that she would take up these matters at the appropriate forums and follow up closely with the Government.
