A new report by the Federation of All India Farmer Associations (FAIFA), developed with Artha Arbitrage Consulting LLP, warns that India’s revised tobacco tax regime, which took effect Feb. 1, could significantly disrupt the country’s flue-cured Virginia (FCV) tobacco sector. The policy reintroduced central excise duties on cigarettes and raised the GST rate on tobacco products to 40% while removing the GST compensation cess, increasing the overall tax burden. The report estimates the changes could reduce FCV crop offtake by nearly 20% and eliminate approximately 2.6 million man-days of employment across farming and related supply chain activities. It also projects illicit cigarette consumption could rise by roughly 39%, potentially exceeding 46 billion sticks, as higher prices shift demand toward unregulated products, while ongoing tax disparities between FCV-based products and other tobacco categories continue to contribute to declining FCV acreage and grower participation.
Tag: FCV
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Pakistan Tobacco Demand Slashed, Farmers Taking Losses
Tobacco purchasing companies in Pakistan have reduced their demand for the 2026 crop by 13.2 million kg, setting total requirements at 61.627 million kg. This marks the fourth consecutive year of cutbacks, with overall demand falling from 85.5 million kg in 2023 to 77.3 million kg in 2024, 74.8 million kg in 2025. The bulk of purchases will be made by multinational firms, led by Pakistan Tobacco Company and Philip Morris (Pakistan) Ltd, which together account for more than 36 million kg of flue-cured Virginia (FCV) tobacco. The remaining FCV demand will be met by 78 national companies, including Khyber Tobacco. While demand for FCV, dark air-cured, and sun-cured tobacco has declined, requirements for White Patta and burley tobacco have increased slightly.
Industry experts note that farmers are facing severe financial losses due to limited storage options and price discrepancies between the weighted average price (Rs 719 per kg) and the minimum indicative price (Rs 545 per kg [$1.96]). Companies profited by Rs 6.2 billion ($22.2 million) from surplus purchases at lower rates in 2025, while growers bore the losses. Despite reduced domestic demand, tobacco exports surged from 20 million kg in 2023-24 to 47 million kg in 2024-25, a 135% increase. However, Ayaz Khan, former director of the Pakistan Tobacco Board, said the benefits of rising exports have not reached farmers, who remain vulnerable to falling purchase prices and shrinking demand, leaving them at a disadvantage compared to multinational and national firms.
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India: Sale of Excess Tobacco Allowed
Image: Tobacco Reporter archive India’s Ministry of Commerce and Industry has permitted the sale of excess flue-cured Virginia (FCV) tobacco via auction platforms, according to The New Indian Express.
The orders follow Chief Minister YS Jagan Mohan Reddy’s letter to Union Minister for Commerce and Industry Piyush Goyal requesting farmers be allowed to sell excess FCV after being negatively affected by the Mandous cyclone.
“Of the total tobacco grown in 53,000 hectares, more than 50 percent of the area was severely damaged, due to which the farmers replanted the crop as there is no alternate crop,” Reddy wrote. “Mandous cycle caused tobacco growers to incur additional costs on the production of the crop during this year as the farmers were forced to go for replanting, which also forced the farmer to irrigate the crop during the season to save the crop. Cost of production increased heavily due to replanting, irrigation and increased labor costs.”
FCV tobacco farmers affected by the cyclone are not in a monetary position to pay penalties for excess tobacco produced beyond authorized quantities. Reddy requested orders similar to those in Karnataka allowing the sale of excess FCV be issued to help tobacco growers in Andhra Pradesh.