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Lower Brazil output pushes up tobacco prices in Karnataka

Karnataka tobacco farmers have never seen such a huge demand for the Flue Cure Virginia, the finest quality of tobacco used in cigarettes.

Karnataka tobacco farmers have never seen such a huge demand for the Flue Cure Virginia (FCV), the finest quality of tobacco used in cigarettes.

Ever since tobacco auctions started in September end, prices of FCV have crossed a record R140 a kg from a price realisation of R110 a kg last year.

Due to lower output in Brazil, the world’s biggest producer of FCV tobacco and India’s key competitor in the global market, the demand for the Indian FCV has increased this season.

Brazil is expected to produce 587 million kg FCV in the current year against 708 kg last year. India’s crop size has been fixed at 270 million kg.

Over 70,000 farmers in Karntaka and nearly one lakh farmers in Andhra Pradesh grow FCV. Tobacco auctioning has ended in Andhra Pradesh where farmers got an average price in excess of R120 a kg.

?Although tobacco auctions would continue for a few months, prices are expected to remain high due to global demand,? said G Kamala Vardhana Rao, the chairman of Tobacco Board.

The crop size for FCV, which is grown under supervision of the Tobacco Board, had shrunk to 2.2 lakh hectares in 2011-12, from 2.5 lakh hectares three years ago. Production, too, has fallen from 300 million kg to 266 million kg in the same period.

A major chunk (70%) of FCV is consumed in the country while the rest is exported. According to the Tobacco Board, the average FCV tobacco prices fell to R89.62 a kg during 2010-11, from a peak of R105.66 a kg in 2008-09.

The Andhra Pradesh agriculture department official says many tobacco farmers have shifted to other crops such as Bengal gram (chickpea), cotton and jowar (sorghum). The Tobacco Board, in collaboration with Central Tobacco Research Institute (CTRI), plans to reduce crop size every year by around 5%.

The government earned central excise revenue by selling cigarettes to the tune of R13,500 crore and foreign exchange of R4,163 crore from exports of tobacco and tobacco products during 2010-11.

Meanwhile, the manual auctioning is currently in progress, the e-auctioning will be launched shortly in all the 11 centres in the Karnataka. E-auction helps in the better price discovery for the farmers.

Tobacco Board has budgeted R30-crore expenditure to be utilised over six years to modernise and maintain all the auction platforms in Andhra Pradesh and Karnataka.

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First published on: 12-10-2012 at 02:16 IST
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