Thousands of tobacco cultivators from Andhra Pradesh and Karnataka took to the streets this week, staging massive protests against the central government's recent decision to impose a sharp hike in taxes on tobacco products. The farmers, whose livelihoods are directly threatened, demanded an immediate rollback of the "excessive" tax increase and a return to revenue-neutral rates.
Widespread Agitation Across Districts
The farmers organized road blockades (rasta rokos), sit-in demonstrations (dharnas), and rallies in various districts of Andhra Pradesh and Karnataka. Their slogans targeted the Centre's unilateral move to notify new, significantly higher duty rules on items like chewing tobacco, jarda, scented tobacco, and gutkha packing machines. The protest was coordinated under the banner of the Federation of All India Farmer Associations (FAIFA), which represents the growers' interests.
The FAIFA reacted sharply to the government's notification, expressing deep concern that the tax hike would force domestic manufacturers to raise prices of finished goods. This, in turn, would lead to a drastic drop in sales, ultimately hurting the farmers who supply the raw tobacco. The association warned that this chain reaction could cause a glut in the tobacco crop market in the near future, devastating the agricultural economy of the regions.
An "Openly Discriminatory" Tax Regime
FAIFA President, Murali Babu, highlighted what the federation calls an "openly discriminatory" tax regime against Flue-Cured Virginia (FCV) tobacco growers from Andhra Pradesh and Karnataka. He provided a stark comparison: FCV tobacco used in cigarettes is taxed at more than Rs 6 per dose in the finished product. In shocking contrast, other tobacco forms used in bidis and chewing products are taxed at less than 1 paisa per dose.
"FCV tobacco farmers are already suffering under the burden of extremely high taxation rates on cigarettes, which were on a per kg basis, more than 50 times higher than for bidis and more than 30 times higher than for chewing tobacco," said Murali Babu. He argued that such extreme disparity punishes the most regulated and compliant farmers in the sector. The current excise hike, he fears, will further widen this fiscal discrimination and crush FCV growers, distorting the entire tobacco economy.
Broken Promise and Dire Consequences
The farming community feels betrayed by a broken promise. Murali Babu recalled that during the announcement of GST 2.0 in September, the Centre had assured that for tobacco products, GST would be charged at 40% of the retail sales price, while the overall tax incidence would remain unchanged. Farmers had welcomed this assurance of revenue neutrality and the government's move to rationalise GST by restructuring rates.
"We are shocked to see that the promise was not kept, and instead a sharp increase in taxes was notified, at the cost of farmers' livelihoods," rued the FAIFA president.
The federation leaders stressed that India's legal cigarette prices are already among the least affordable in the world when measured against per capita income, as per the World Health Organization's affordability index. The current steep increase will render legal products unaffordable for a huge section of consumers, accelerating a migration to illegal, smuggled alternatives.
FAIFA warned that India is already the fourth-largest illegal cigarette market globally, with illicit products constituting roughly 26% of total cigarette consumption. This illegal market thrives on tax arbitrage, where high and uneven taxation makes smuggled goods significantly cheaper. A sharp price increase for legal products will cause the illegal market to expand rapidly, overwhelming enforcement agencies and leading to significant revenue losses for the government exchequer.
In light of these threats, FAIFA has urgently appealed to the government to roll back the notified excise rates and revise them to revenue-neutral levels. They argue that a stable taxation framework is essential not only to sustain farmer incomes and protect employment across the value chain but also to align economic policy with long-term public health goals by discouraging smuggling and supporting domestic, regulated agriculture.
