Tobacco farmers warn of severe impact from excise duty hike

GUNTUR: Tobacco farmers in Karnataka and Andhra Pradesh have expressed deep concern over the sharp increase in excise duties following the Central Excise (Amendment) Bill, 2025, warning that the move could severely impact farmer livelihoods and destabilise the legal tobacco economy. Farmer bodies said the abrupt tax hike comes at a time when the sector is already under stress due to falling export realisations, stagnant domestic prices, rising input costs, and shrinking cultivation areas imposed through regulatory caps.The Federation of Karnataka Virginia Tobacco Growers Associations said the revised excise rates would compel manufacturers to raise prices of finished products, leading to a contraction in legal sales. This is expected to reduce demand for raw tobacco, directly affecting farmgate prices and farmer incomes, while creating the risk of a glut in the tobacco crop market.H G Paramesh, President, Federation of Karnataka Virginia Tobacco Growers Associations, said the farming community had accepted GST reforms on the clear assurance that the transition would be revenue-neutral for tobacco products. “Farmers across India held on to the govt’s promise that the overall tax incidence would not be increased. The sudden and steep hike in excise duty violates that assurance and directly threatens farmer livelihoods,” he said, warning that higher retail prices would shrink legal demand and increase market uncertainty for growers.Farmer leaders also highlighted what they described as long-standing fiscal discrimination against flue-cured Virginia (FCV) tobacco growers in Karnataka and Andhra Pradesh. FCV tobacco used in cigarettes is taxed at rates many times higher than tobacco used in bidis and chewing products, despite FCV cultivation being among the most regulated and compliant segments. This disparity, they argued, unfairly penalises farmers who operate within the legal framework.The federation cautioned that excessive taxation has historically failed to curb consumption and has instead fuelled illicit trade. India already faces a serious smuggling challenge, with illegal cigarette products accounting for a significant share of total consumption. A widening price gap between legal and illegal products would benefit foreign producers, harm domestic farmers, and result in revenue losses for the exchequer.The FCV tobacco sector has witnessed prolonged stress over the past decade, with declining auction volumes and reduced cultivation area leading to significant employment losses across farming and allied activities, even as input costs such as fertilisers, labour, and transport continue to rise.Against this backdrop, the Federation of Karnataka Virginia Tobacco Growers Associations has urged the govt to roll back the notified excise rates and revise them to revenue-neutral levels to disincentivise smuggling and support domestic agriculture. A stable taxation framework, the federation said, is essential to sustain farmer incomes, protect employment across the value chain, and align economic policy with long-term public health goals.