Janaki Ghatpande & Sangita Ghosh

Cigarette manufacturing companies are expected to give a puff of relief this year as chances of an increase in cigarette consumption look bright. India’s cigarette production is forecast to recover marginally to 91.5 billion pieces in India in 2002 from just 86.3 million pieces last year, according to figures released by the United States Department of Agriculture (USDA) yesterday.

For 2002, says USDA, out of the total world production of tobacco of 5,678,753 metric tons, India will produce 530,000 MT. Out of the total world exports of 1,951,091 MT, India will export 125,000 MT, with a jump of about 16 per cent to 1.1 billion pieces.

The increase can be attributed to a rebound in west Asia, Singapore and in states of the former Soviet Union. Consumption in India is expected to be 470,305 MT of a total consumption of 6,303,036 MT.

High cigarette pieces were mainly responsible for low production of cigarettes last year. Because of price hike consumers shifted from brand named cigarettes to the mini cigarette sector or ‘beedi’ in the country.

Also a glut in the filter tobaccos in the world market hit the Indian tobacco sector as it depressed exports and prices. The impact of this glut was felt more acutely by tobacco growers in Andhra Pradesh rather than their counterparts is in Karnataka.

Cigarette sales in India have been falling. From 104 billion sticks in 1997-98, sales had gone down to the present level of 87 billion sticks. The trade, says a cigarette manufacturing major, is being over- burdened with heavy excise duty. Any further burden would prove to be counterproductive. Ultimately farmers would suffer as companies would have to cut down on tobacco purchases.

In order to increase India’s share in the tobacco market globally, lobbies have been pushing for foreign direct investment (FDI) in the trade, either in manufacturing and in cultivation. Policies governing the industry were being revisited to make it more investor friendly without destablising the domestic structure. The existing policy of allowing import of cigarettes for re-export may get a fresh look.

The government is also working towards a policy correction to remove the prevailing confusion over FDI in tobacco. Trade sources said the government was planning to introduce a policy which may declare the tobacco sector a ‘demerit industry’. This may restrict domestic expansion of capacity.

New guidelines are likely to be announced before the winter session of Parliament.