No other commodity in India has exhibited the kind of schizoid behaviour pattern as Indian tobacco has over the last few years, Tobacco Board have in the past tried to attribute the lack of a focused policy to the perceived flaw in the commodity itself. "This is one commodity where we cannot talk about boosting domestic consumption for obvious reasons", the then Tobacco Board chairman told ET some nine summers ago.

However, sections of the industry have not exactly helped either when it comes to accessing the international market. There has been a tendency to have policies formulated not on the basis of an understanding of market forces but in an emotive manner. This tendency has been aggravated by the fact that tobacco has not just remained a commodity but become some kind of political crop, especially in those districts of Andhra Pradesh and Karnataka where the bulk of exportable cigarette tobacco is cultivated.

With the bulk of those in the industry being either growers or agricultural labour and with this preponderance being reflected in the composition of the Tobacco Board, there has been an inevitable tendency among those in authority to formulate policies in tune with the perceived aspirations of growers, instead of evolving and implementing strategies based on market requirements. The emphasis has, more often than not, being on selling what is produced rather than producing what the market wants. Take flavourful tobaccos where it is only now that India is increasing its production in this segment which fetches a premium in the international market.

This strategy or rather the absence of one has seen Indian tobacco missing the international market bus on quite a few occasions. In the late ‘60s and early ‘70s when the racist Ian Smith regime in Southern Rhodesia went in for a UDI (Unilateral Declaration of Independence) and was subjected to a trade embargo, competing origins like Brazilian tobacco went into overdrive to fill up the vacuum in key cigarette manufacturing markets like the USA. Today, Brazil is the world’s leading exporter of tobacco while India is in fourth place, with China breathing down its neck.

However, all this pales into significance with the most recent instance where Indian tobacco appears to have shot itself in the foot. And that is in the observation of a crop holiday in the country’s main tobacco-growing state of Andhra Pradesh. The rationale behind the crop-holiday could have been two fold- to secure a better price realisation for tobacco in the next season and to set up the search for alternate crops.

Unfortunately, not only was the crop holiday observed at a time when prices of other commodities were also falling but, worse, even the hope of getting a better deal for tobacco in the subsequent season was skewed with China stepping into those markets where Indian tobacco had absented itself from. International market dynamics are not governed by stand- offs between cosmetic growers and traders in one producing country. Speaking on the sidelines of a Tobacco Institute of India awards ceremony in Mysore a fortnight ago, the exports manager of the country’s leading tobacco trading and cigarette manufacturing company told newspersons that the AP crop-holiday had seen key markets like Russia switching to Chinese tobacco. These markets, he added, were now reluctant to return to Indian tobacco and just because the Chinese origin was available at a much cheaper FOB price but also because the crop-holiday had only reinforced perceptions of India being an unreliable source of supply.

All of which could explain why India’s tobacco exports have been on a downhill mode over the last three financial years, both in terms of quantum an dollar-earnings.

Volumes have dropped from 136 million kg for the financial year of ‘99-00 to 115.93 million kg for ‘00-01 and 102.09 million kg for ‘01-02. Dollar value earnings for India’s tobacco exports have slumped from $245.55 m for ‘99-00 to $212.56 m in ‘00-01 and $189.04 m in ‘01-02. The real cost of the crop holiday in AP can only be realised only when the full impact of China’s intervention in those markets which India temporarily forfeited, begins to be felt.