The ongoing crisis in the Flue-Cured Virginia (FCV) tobacco sector has exposed deep structural weaknesses in India’s tobacco marketing system, leaving thousands of farmers in Andhra Pradesh facing severe financial distress. A crop that fetched over ₹360 per kg during the previous season is now struggling to cross ₹265, with the average auction price remaining at just ₹219.50 per kg as of July 6. As auctions progress at a sluggish pace, farmers argue that the problem extends far beyond market fluctuations and reflects failures in production planning, procurement and export policy.
According to the Tobacco Board, only 29.62 million kg had been sold by July 6, against the nearly 70 million kg that would normally have been auctioned by this stage. The Board had authorised production of 142 million kg for Andhra Pradesh during the 2025-26 season, but actual production is estimated at nearly 240 million kg, creating a surplus of about 100 million kg. Internationally, the situation has also deteriorated, with global FCV production reportedly having increased.
While the numbers explain part of the crisis, farmers believe they do not tell the complete story. Many growers allege that inadequate participation by companies and traders at auction platforms has further weakened competition and depressed prices. Recognising these concerns, Andhra Pradesh Chief Minister N. Chandrababu Naidu directed that companies ensure procurement at a minimum of ₹200 per kg, while Agriculture Minister Kinjarapu Atchannaidu ordered field-level inquiries into allegations of syndicate practices among tobacco companies.
Indian Tobacco Association Secretary Yarlagadda Ankamma Chowdary attributed the situation largely to disruptions in exports. “The traders could not export the produce to the Middle East countries due to the ongoing war. Since the war started in February, exporters have found it difficult to send containers to Dubai,” he said. He said that “heavy taxes imposed by the Central government are discouraging the market sentiment,” while exporters are also deprived of export incentives because tobacco is categorised as a demerit crop.
At the same time, Mr. Chowdary said buyers also have a responsibility towards farmers. “The traders and companies, who have given indent while deciding the crop size, must procure the produce from farmers. It is their responsibility,” he said, adding that the Association has been requesting all companies to actively participate in Tobacco Board auctions.
The Tobacco Board, however, faces criticism from cultivators for allowing production to exceed the authorised crop size in the first place, and for its inability to ensure auctions at platforms.
Responding to these concerns, Tobacco Board Chairman Yashwanth Kumar Chidipothu said the Board had been continuously persuading traders to increase procurement. “We have been insisting that traders purchase tobacco at the auction platforms and are trying to ensure there are no rejections of bales,” he said. Acknowledging the slow pace of sales, he said that by this time around 70 million kg should normally have been auctioned. He, however, attributed part of the problem to quality issues, saying that “farmers are bringing more low-grade produce to the markets, leading to rejection of bales.”
Farmer organisations strongly contest this assessment. Guduru Nagaraja, General Secretary of the Federation of All India Farmer Associations (FAIFA), said that “this year the farmers have produced quality tobacco when compared with previous years.” He warned that “the farmer is not even getting returns equal to the input costs,” adding that the tobacco sector supports millions of livelihoods, including farm labourers, graders, threshers, transporters and packers.
A tobacco grower said that when farmers produced a surplus quantity, it was a natural advantage for buyers to procure more, export more and earn more, but instead they were decreasing the price.
The Tobacco Board has responded by reducing the authorised crop size for the 2026-27 season to 81 million kg and by directing companies to ensure a minimum procurement price. While these measures may provide some relief, they address only part of the problem.
The FCV tobacco crisis underlines that sustainable solutions require more than price assurances. Farmers need timely regulation of crop size, effective prevention of unauthorised cultivation, transparent participation by all registered buyers in auction platforms, consistency in the price mechanism and stronger intervention by the Union government to facilitate exports during periods of global disruption. Unless these structural deficiencies are addressed collectively, the burden of market failures will continue to fall disproportionately on farmers, who remain the weakest link in the tobacco value chain despite being its primary producers.
Published - July 08, 2026 12:35 pm IST