TOBACCO ECONOMICS IN INDIAThe Voice of the Farmer and other Stakeholders

Sustainable Livelihood

Inclusive Growth

Prosperity

Development

The quest for defining and providing a sustainable

alternative livelihood needs to take into account the

socioeconomic capabilities of tobacco farmers.

This right and entitlement of such farmers for an

equitable and viable socioeconomic alternative is

embedded in the Constitution of India which

equates this to their right to life. The voice of the

farmers needs to be heard and respected for any

means that affect their lives.

Tobacco has been a part of the Indian social and religious fabric for the past 400 years

and is closely intertwined with its multicultural diversity across various economic and

social strata.

Tobacco industry in India has unique socio-economic dimensions and provides

employment to people in some of its poorest and distant parts. Naturally, any debate on

developing alternative livelihood patterns for those engaged in tobacco cultivation or

those forming a part of the industry chain must taking into consideration the realities

facing such people, their dependents and their communities.

The right to livelihood is a fundamental right guaranteed by the Constitution of India to its

citizens.

One of the important aspects this study brings to the fore is the social dimension of the

problems that the tobacco-producing regions are facing. During such debates the rights

and entitlements of the marginalized farmers are often overlooked and their voices

seldom heard. To ensure that considered action is taken, there is a need to undertake

thorough research along with fact based analysis of the industry and its constituents.

The viability of options has to be established before any attempt is made to suggest

alternative livelihoods.

One must also keep in mind that our country has traditionally been a net importer.

Tobacco provides a counter balance through exports which can be doubled in a span of

3 to 5 years and thereby improving the living conditions of thousands of people in rural

India.

This study has adopted a fact-based analysis of the ground realities in the tobacco

producing regions. It has relied on the interactions with the cultivators, their families,

workers in the tobacco supply chain, among other stakeholders. The emphasis has been

to assess the nature of the industry and find appropriate solutions to develop alternative

models of livelihood.

The study is aimed at striking a well-balanced debate on what could be the way ahead to

develop alternative livelihood solutions for those who are associated either directly or

indirectly with the tobacco industry.

I would like to congratulate Thought Arbitrage Research Institute (TARI) for preparing this

study, which I hope will lead to an in-depth analysis of the problems associated with the

tobacco industry

I would also like to thank all the stakeholders who took part in the study.

D. S. Rawat

Secretary General, ASSOCHAM

FOREWORD

ACKNOWLEDGEMENTS

ASSOCHAM Shri D.S Rawat, Secretary GeneralShri Ombeer Singh Tyagi, Senior Director

Andhra Pradesh Shri Achanta Gopal Krishna, President, Virginia Tobacco Growers Association Shri Karatam Venkata Reddi Naidu, Virginia Tobacco Farmers AssociationShri Suryaprakash Rao

Karnataka

Shri Vikram Raj Urs, Federation of Karnataka Virginia Tobacco Growers Association Shri Vishwanath RV, Karnataka Tobacco Growers Forum

GujaratShri Ranjikant Patel, President, All India Bidi Industry Federation Shri Umesh Bhai Desai, MD Desai Bidi Pvt. Ltd.

We also are grateful for the discussions and guidance provided by officials of Central Tobacco Research Institute, Rajahmundry; Tobacco Board, Guntur, Bengaluru and Tobacco Institute, Delhi

Authors

Thought Arbitrage Research Institute (TARI) is not for profit organization set up under Section 25 of the Indian Companies Act. TARI is a privately funded, independent and non-partisan Indian think-tank on –

• Corporate Governance

• Whistleblower

• CSR and Sustainability

• Economics and Public Policy

TARI is founded by Kaushik Dutta and Kshama V Kaushik.

This report is authored by the following team of Thought Arbitrage Research Institute:

Research Team – Thought Arbitrage Research Institute

Research Conceptualisation & Industry Interface:

Kaushik Dutta

Principle Authors:

Kaushik Dutta

Chetan Bundela

Design and Editing:

Gayathri Venkatraman

Nandita Pai

TABLE OF CONTENTS

Executive Summary 1

Chapter I 4

Theory of capabilities and its relevance to sustain livelihood 4

Livelihood diversification 5

Inclusion of right to livelihood as a fundamental right under the Indian Constitution 5

Olga Tellis and Ors vs. Bombay Municipal Corporation and Ors. (MANU/SC/0039/1985) 6

Assessing the economic losses due to reallocation of resources 7

Chapter II 8

Socioeconomic impact of tobacco in India 8

Employment in tobacco industry 8

Agricultural employment in tobacco 9

Impact on livelihood 9

Importance of tobacco for tribals, women and vulnerable groups 9

Major tobacco producing states 11

Contribution to rural economy 11

Informal labour markets and lower social floor 12

Tax collection from tobacco 12

Exports of tobacco and its effect on rural livelihood 12

Rural employment and tobacco exports 13

Way Forward: India’s institutional level effort for rural livelihood enhancement 14

Chapter III 16

In search of an alternative livelihood for tobacco farmers 16

Global alternatives and diversification efforts for tobacco 16

Framework for defining alternative livelihood for tobacco farmers 17

FCTC ratification status and its impact on markets 18

The search for an alternative crop and its feasibility in India 18

Alternative uses of tobacco 19

Economics of alternative crops 20

Latest developments in search of alternatives 22

Chapter IV 23

Tobacco and India’s rural economy 23

Relationship between economic growth and human development 23

Basis for selection of indicators 24

Basis of selection of the states 25

Research methodology 25

Case Study 1: Andhra Pradesh 26

Case Study 2: Karnataka 32

Case Study 3: Gujarat 38

Conclusion and Recommendations 41

Tobacco was introduced to India by the Portuguese sailors when they landed on its shore to establish trade links around 1600 AD. That was more than a hundred years after it was discovered in the American continents and taken to Europe. The Portuguese who realised the commercial value of the crop because of its medicinal and stimulant properties, brought tobacco for barter when they came looking for Indian textile and spices.

The Portuguese initially introduced tobacco in the royal courts where it gained popularity. Soon tobacco spread to the commoners and became a valuable trade commodity. Cochin and Goa on the West Coast and Machilipatnam on the East Coast emerged as the main ports of tobacco trade from where the Portuguese carried out their business.

It was, however, during the British rule that the commercial dimensions of production and consumption of tobacco grew significantly. The British initially imported American tobacco to finance their activities in India but after the American colonies declared their independence in 1776, the British started growing it in India as a cash crop, both for foreign trade and domestic consumption.

Tobacco thrived because of the royal patronage and its easy acceptance by men and women cutting across social, cultural and religious barriers. Historical accounts suggest that it was first introduced in the kingdom of Adil Shahi which was run from Bijapur in the present day Karnataka and from there it travelled to the Mughal court of Emperor Akbar up in north India.

The hookah owes its origin to the introduction of tobacco to the Mughal court. The royal physician of Akbar is said to have come out with the idea of first purifying the smoke by passing it through water for diluting the quantum of tobacco and thus came the

[1]hookah.

Gradually, tobacco came to be used in various forms and found its way as an additive to paan – better known as ‘tambula’ in Sanskrit or betel quid –which highlight its importance and wide acceptability. Paan has not only been an essential part of Hindu rituals but finds wider social and cultural acceptance in India. Paan chewing existed in India and South-East Asia for over 2000 years. Even the invading kings and settlers, including the Mughals, adopted it.

Tobacco gained acceptability for its medicinal properties over the past centuries. Classical Sanskrit literature bears testimony to this. A description of the plant, its medicinal values and adverse effects can be found in Yogaratnakara, a medical compendium composed

HISTORY AND EVOLUTION OF TOBACCO PLANT –

AN INDIAN AND GLOBAL PERSPECTIVE

between AD 1625 and AD 1750. It refers to tobacco as a smoking plant having medicinal properties. It is said to facilitate smooth intestinal functioning and motion, prevent toothache by killing germs, cure itching on the skin, control wind in the body, and is also said

[2]to be useful in the treatment of scorpion bites.

A study by Yale states that the Spanish doctor, Nicolas Monardes in his immensely popular history of the medicinal plants of the New World, published in 1571 claimed that tobacco cured more than 20 ailments, including cancer. Gradually, recreational use supplanted medical use throughout Europe. Spanish doctor Juan de Cardenas, a disciple of Monardes, touches on the transition: "To seek to tell the virtues and greatness of this holy herb, the ailments which can be cured by it, and have been, the evils from which it has saved thousands would be to go on to infinity...this precious herb is so

(3)general a human need not only for the sick but for the healthy."

According to the Journal of the American Medical Association, those that suffer from mental disorders such as ADHD/ADD, schizophrenia and other disorders may experience positive effects from smoking. Apparently, doses of nicotine have a short term normalization effect on the EEG (electrical activity in the brain) and also say that those that suffer from Alzheimer’s or dementia can also benefit from doses of nicotine.

(4)According to studies, patients cognitive abilities slightly improved.

In current days, pharma companies are experimenting with tobacco plant as a possible provider for some of the key ingredients for creating a cure for the dreaded Ebola virus.

The tobacco plant has been a part of Indian culture and ethos for over 400 years and has permeated into the cultural and even religious sanctums. The balance is delicate and needs to be dealt with great sensitivity. The debate between concerns for health and those of livelihood and other potential benefits of the plant, needs to be done in a holistic manner covering various aspects and its profound effects and not merely get persuaded in a uni- dimensional perspective clouding all other points of view.

(1)Chattopadhayya A. Emperor Akbar as a healer and his eminent physicians. Bulletin of Indian Institute of History of Medicine 2000;30:1518.(2)Panchamukhi AR. Tobacco in Ancient Indian Literature. Working Paper No. 2. Dharwad: Centre for Multi-disciplinary Development Research, 1999(3)http://yaleglobal.yale.edu/about/tobacco.jsp(4)http://readynutrition.com/resources/it-aint-just-for-smoking-known-but-beneficial-uses-for-tobacco_27082010/

HISTORY AND EVOLUTION OF TOBACCO PLANT

1

This study titled Tobacco Economics in India: The Voice of the Farmer and Other Stakeholders is one of the few studies which puts forth the perspectives of the farmers and other stakeholders in relation to the changing dynamics of tobacco cultivation. The general perception around tobacco in India, as in the rest of the world, is negative, created largely due to a strong public campaign against its use with an acute emphasis on the effects on health. This study does not discuss the health or related aspects of tobacco use but deals with the socioeconomic dimension of tobacco and the people associated with it, an aspect which often goes unnoticed in such a hostile environment.

The report, which is based on experimental studies, is supplemented by quantitative and qualitative analysis of data collected from important tobacco producing regions in India.

Rationale and theoretical framework

The rationale for the study and theoretical aspects of livelihood diversification is drawn from various seminal studies done around the world. This study has been greatly influenced by the work done by the Brazilian Agrarian Development Ministry (MDA) in

1Brazil which suggested that implementation of sustainable livelihood solutions to persons involved with tobacco should have a holistic approach, involving implementable solutions to the health, economic, social, institutional, political and environmental aspects of such people. It went on to add that any alternative livelihood solution should keep in mind the impact it will have on the livelihoods of millions of people across the globe and their aspirations.

This report, like the Brazilian study, relies on

determining the theoretical contexts from Amartya

Sen’s theory on capabilities and Frank Ellis’

livelihood diversification approach. Based on these

theories, the key concepts propagate that farmers’

income and crop profitability should not be the only

measure for successful alternatives. Rather, all

factors related to farmers’ subsistence must be

considered while looking for solutions to an

alternative livelihood. The development of

alternative livelihood models must take into

consideration a holistic approach to go beyond

merely crop profitability. The focus must be on

developing alternatives based on capabilities and

aspirations of the people and not merely on short-

term economic substitution of income.

Tobacco in India

In India, tobacco is grown on 0.45 M ha of area (accounting for only 0.31% of net cultivated area in the country) with 750 M kg production. There are 10 distinct tobacco types grown in 15 states of the country which include cigarette (FCV, Burley and Oriental) and non-cigarette types (bidi, chewing, hookah, natu, cheroot, cigar and HDBRG). India stands second in tobacco production and exports in the world.

Tobacco contributes over `21,000 crores (USD 3.8

billion) to the national exchequer through foreign exchange earnings and internal excise taxes on manufacturing. The tobacco crop also directly or indirectly supports 38 million people engaged in production, processing, marketing and exports, which includes 6 million farmers and 5 million people involved in bidi-rolling and tendu leaf plucking. The crop is a lifeline for a sizeable population, particularly rural women, tribals and other weaker sections of the society, who have few means of alternative income opportunities.

The issue of alternative livelihoods

However, some of the major tobacco growing countries like USA, Argentina and Switzerland have not ratified the Framework Convention on Tobacco Control (FCTC) till today. What is more, countries like Malawi, Indonesia and Zimbabwe have not even signed it. Tobacco is one of the significant commercial crops being cultivated across these countries, So there is anticipation that countries like India who have ratified FCTC will lose their market to Zimbabwe, Malawi and Indonesia and face the prospect of seeing millions of job losses, livelihood impact and forex losses.

A number of proposed interventions for economically sustainable alternatives to tobacco have been identified in studies in various regions of the world. These studies show that if the profitability of alternative crops is good, the chances of farmers willing to stop growing tobacco are more, provided that there are sustained economic opportunities and provision of necessary market support by the Government.

According to a study by the Central Tobacco

Research Institute and Bidi Tobacco Research

Station, at least 65% of the tobacco farms in states

like Andhra Pradesh, Karnataka, Madhya Pradesh,

Gujarat, Maharashtra, and Odisha account for 90%

EXECUTIVE SUMMARY

1Methodological Guidelines For The Analysis Of Tobacco Growers Livelihoods Diversification, Porto Alegre, Brazil, February 2012

of total tobacco cultivation. CTRI has identified

cultivation of new, alternative crops like soybean,

groundnut, red gram, maize, paddy, green gram,

chillies, mustard, black gram, sunflower, cotton and

sugarcane.

The current efforts made by the Government to

scale up and rationalise the use of alternative crops

has not been sufficient to convince farmers to shift

as they have already experimented with all known

substitute crops and are aware of their economic

risks and returns. The risks to such growers

increase immensely for a shift from tobacco and

that concern needs to be recognised and

addressed. Most farmers are willing to shift to other

crops from tobacco if the socioeconomic returns on

such crops are similar to those from tobacco.

Apart from the technical feasibility issues of growing

such crops on a commercial basis, the main

concern among farmers regarding the economic

viability of alternate crops to tobacco needs to be

addressed. The studies done by government

agencies until now are only on demonstration plots,

under technical supervision and the balanced

application of fertilisers/manure, and therefore, the

results need to be successfully field-tested on a

large scale to be able to induce the tobacco-growing

farmers to shift to alternate crops.

Significant research in all aspects of cropping and

its economic and social manifestations has to be

undertaken if a holistic solution to the livelihood for

such stakeholders needs to be found.

Socioeconomic comparison of tobacco and

other comparable cash crops

In this section of our study, we will discuss the

socioeconomic comparison of tobacco and other

cash crops in three states, i.e., Andhra Pradesh,

Gujarat and Karnataka which together account for

85% of the country’s tobacco growing areas. We

make a comparative study between predominantly

tobacco growing districts with non-tobacco growing

districts, based on certain parameters of economic,

developmental and other matters of relevance.

The key objective is to explore whether comparable

districts that predominantly grow tobacco show

different economic, social and development

indicators than those which do not.

A mixed-methods design including qualitative

method (in-depth interview and focus group

discussion) and quantitative data collection from

government sources formed the basis of the study

design and architecture. Mixed-methods design

allowed our researchers to develop a

comprehensive understanding of the complexity of

human behaviours and experiences. Incorporation

of qualitative methods in the present study added a

socioeconomic dimension to the impact of tobacco

farming on livelihood and the overall development

of the farmers.

The base information of the districts covered under

our study was collected from major government

data sources like National Sample Survey Office

(NSSO), Ministry of Agriculture, Census, state

planning departments and also from the respective

industry associations. In order to have a broader

analysis, we covered the general socioeconomic

characteristics like household assets, income

levels, etc., together with quality of life indicators as

identified by the Planning Commission. We also

analysed the effect of UN Millennium Development

Goals on Child Mortality and Maternal Health, etc.,

as additional indicators.

In Andhra Pradesh, the overall economic and social

indicators in the predominantly tobacco growing

districts of West Godavari and Prakasam compare

favourably with the comparable and adjacent

districts that grow alternative crops. Hence, tobacco

does create higher returns and other social

capabilities for its farmers than those who are

engaged in growing other cash crops.

In Karnataka, the districts of Mysore and Hassan

have superior economic and social development

indicators than the comparable districts of

Chamrajnagar and Chitradurga, which grow

alternative crops. The other indictors like per capita

income, MPCE, GDDP demonstrate better

socioeconomic infrastructure in the tobacco growing

districts.

The indicators to ascertain the level of economic,

social and human development in selected districts

of Gujarat show that tobacco growing districts have

higher levels of physical infrastructure, health and

2

EXECUTIVE SUMMARY

education. The agriculture sector in Gujarat is

market focussed and is fungible as far as crops are

concerned. The farmers, over a period of time, have

modified their crop growing patterns to take

advantage of market demand and dynamics.

However, Gujarat being significantly industrialised,

the economic or social indicators of its districts may

not be completely attributable to agriculture and

mainly tobacco.

Tobacco cultivation is critical for the rural economy

of these states, especially Andhra Pradesh and

Karnataka. The immediate socioeconomic impact

of decline in the tobacco industry in these districts

may be substantial unless viable crops are

identified and commercially exploited. In these

regions, farms tend to be small, production costs

are high, and relatively few alternatives are

available to tobacco and hence solutions would be

complex.

Conclusion

The quest for defining and providing a sustainable

alternative livelihood needs to take into account the

socioeconomic capabilities of tobacco farmers. This

right and the entitlement of such farmers for an

equitable and viable socioeconomic alternative are

embedded in the Constitution of India which

equates this to their right to life.

Special attention should be given to the large

numbers of women, tribals and Dalits employed in

tobacco growing and processing who do not enjoy

freedom of association and the right to collective

bargaining, with a view to providing them with

sustainable livelihoods. In view of the expressed

concerns over employment, social security and

welfare benefits, social partners and Governments

should continue to put in more efforts in addressing

the uncertainty prevailing due to the increasing

challenges in the tobacco sector.

A report by the Ministry of Health (2007),

acknowledges that tobacco has a profound effect

on the economic prosperity in the regions where it is

grown. We have found that tobacco growing regions

in India have better economic development

indicators than comparable regions growing

recommended substitute crops. The solutions to

alternative living of tobacco farmers need to be

holistic, inclusive and responsive to the needs of

the farmers displaced from exercising their

livelihood.

Exports is a key multiplier of economic returns to

tobacco farmers. In the absence of coordinated

efforts by countries who have neither ratified nor

signed any treaty for limiting production of tobacco

will ultimately lead to trade disputes and illegal

smuggling. This would not change the overall supply

of tobacco products but countries like India will face

the prospect of seeing large number of job losses

and impact on livelihood of millions.

The fiscal impact will come in the form of lower

taxes and duties and loss of foreign exchange that

comes through lower exports, which in the fiscal

year 2013 were `5,000 crore and expected to grow

at a rate of over 11% based on Government’s

estimates.

In this scenario, if India withdraws from this market

wholly or partially, the market will be catered by

countries which are not bound by any convention.

This would be to the detriment of Indian tobacco

growers, who in the absence of alternative

livelihood would also lose the benefit that accrues

from exports.

Diversification should include both agricultural and

non-agricultural opportunities, including

transformation of one agricultural product to

another. Substitution of one economic activity by

another does not, however, fully address the

problem of the poverty and vulnerability of tobacco

farmers and growers for whom the right to livelihood

is the same as their right to life.

The answer to an alternate sustainable livelihood

for tobacco growers lies in all stakeholders working

towards an implementable solution based on

research, data and a deep understanding of

economic, social and development ramifications of

such change.

3

EXECUTIVE SUMMARY

The general perception around tobacco in India is

negative, created largely due to a strong public

campaign against its use. The socioeconomic

dimension of the tobacco industry and people

associated with it often goes unnoticed in such an

environment. This study aims at conducting a

holistic analysis of the socioeconomic factors

affecting the livelihoods of tobacco growers in India

as well as people associated in its trade. The report,

which is based on experimental studies, is

supplemented by quantitative and qualitative

analysis of data collected from important tobacco

producing regions in India.

As an important tobacco leaf producer and exporter,

India is obliged and responsible towards finding out

an economically viable and sustainable alternative

for over 38 million people including women, tribals

and other economically disadvantaged sections of

society dependent on tobacco production and trade.

In recent times, limited efforts have been made to

find alternative economic activities and to protect

livelihoods of the tobacco growers. The current

report aims at establishing a framework that can

provide an economically viable and sustainable

alternative livelihood for the tobacco growers who

are the most vulnerable link in the economic chain

of tobacco.

This report seeks to evaluate public policy

directions affecting the socioeconomic aspects of

the tobacco industry, going on to explore methods

that could contribute to the implementation of

economically viable and sustainable alternatives.

Like the MDA study in Brazil, this report is geared

towards determining the theoretical contexts as laid

out in Indian economist Amartya Sen’s “capability

approach”. We further base our study on the Frank

Ellis’ livelihoods diversification approach. Tobacco

farmers’ income and profitability of the crops

should not be the only measure of successful

alternatives, but all factors related to farmers’

subsistence must be considered. The development

of alternative livelihood models must involve a

holistic approach that goes beyond crop profitability.

Theory of capabilities and its relevance to

sustain livelihood

Amartya Sen says that the theory of capabilities

requires that for development to take place it is

necessary to make people use their livelihoods to

produce the living conditions they aspire. Any

restriction on freedom to exercise this capability

implies a barrier to developing the fullness of the

human condition. In this approach, the quality or

conditions of life are not measured solely by the

property of a set of goods or money; instead, they

are measured by the capacity individuals have to

make use of these goods, resources and money

(which are the means) to obtain satisfaction or

happiness (the ends) in their lives. Hence mere

substitution of one’s livelihood with another

economic activity does not necessarily fulfil the

capability of these persons.

DA Clark in his book, “Capability Approach – Its

Development, Critiques and Recent Advances”

(2008) states the overriding objective of

development should be to expand human

capabilities rather than economic growth. It

suggests that while growth may be necessary for

development, it is not always sufficient. In broad

terms, it is possible to distinguish between growth

mediated and support led development (Dreze and

Sen, 1989; Sen, 1999, ch.2). While the former

operates through broad-based economic growth

measures like expansion of basic capabilities

through higher employment, improved prosperity

and better social services, the latter works primarily

through proficient welfare programmes that support

health, education and social security. Public action

also plays an important role in supporting

capabilities directly and providing political pressure

for state intervention in times of crisis and hardship.

At the micro level, policy action might focus on selecting beneficiaries (according to functioning poverty) for public works programmes, welfare payments or microfinance projects, inter alia (e.g., Dreze and Sen, 1989; Alkire, 2002). Such projects should take note of adequate income, which is the amount of money each person needs to achieve minimal functioning (Sen, 1992, ch.7; 1993, pp.41-

INTRODUCTION AND RATIONALE OF THE STUDY

CHAPTER I

4

2). The problem with this kind of approach is that it is difficult to identify people with relatively efficient conversion functions in advance.

In order to strengthen livelihoods, it is necessary to create mechanisms that allow various options or to generate a portfolio of options and strategies for employment and income, thus stimulating farmers’ resilience to deal with crises or their vulnerabilities. The livelihood substitution programmes of the government for tobacco farmers need to consider some of these variabilities and principles for determining how such substitution will take place.

Livelihood diversification

This theoretical background creates dialogues with the livelihoods diversification approach elaborated

2by Frank Ellis to analyse poverty situations and vulnerabilities in rural areas. The interface between the theories of Ellis and Sen is the idea that strengthening individuals and rural families capabilities can be performed through diversification of production and economic organisation implying thereby that the greater the diversity in the unity of production or family, the greater are the opportunities they may have regarding options of choices.

The livelihood approach shows that to think about alternatives does not mean a simple switch from crops. It would be easy enough to substitute commercial tobacco production with other crops. In contrast, carving out an alternative would require strong technological, institutional and political support given that it involves the livelihood of millions of people in India.

The focus on livelihood implies enlarging options beyond the economic and productive dimensions, and it also offers an insight to argue in favour of actions and policies in relation to tobacco production activities.

The livelihood of an individual or families is a set of assets they have to access and use resources. The livelihoods and ways to access define the ways of life of a person or family. If it is not sufficient to have knowledge of capitals (goods) that families have, it is also not sufficient to have knowledge solely about the perception they have as to their own living conditions. So when elaborating diagnostics and evaluations that aim to support public policies to improve tobacco growers’ living conditions and/or diversify the production, it is necessary to recognise that the focus should be on the livelihoods and the ends people pursue for their lives.

In this background, India must adopt strategies to livelihood diversification that aim at implementing economically viable and sustainable alternatives to tobacco production that may be considered as initiatives, actions, activities and policies that aim to change (qualitative change) and to transform (quantitative change) cultural and economic aspects of tobacco growers.

The cultural strategies aim at changing and transforming the understanding of farmers’ cognitive schemes that attach them to beliefs and representations they are subjected to throughout their long tradition as tobacco growers, or by the marketing ideology of tobacco agribusiness companies.

The economic strategies comprise a broad set of initiatives and actions that seek to provide viable and specific alternatives (capable of generating and maintaining an optimal level of income) to farmers so they feel stimulated and encouraged to reduce or abandon the cultivation of tobacco.

Diversification of livelihoods is not only a set of policies and practical actions. It also demands an institutional process (formal and implicit) that is rooted in the farmers’ cognitive, mental and cultural structures, and the population as a whole, including public managers and government institutions. In India, the CTRI, Andhra Pradesh, which helps farmers in marketing, selling, training and also in financial terms is an example of this process.

In order to understand the livelihoods of tobacco growers in India, it is necessary to identify resources they have or can access, and to capture the perceptions they have towards their own living conditions.

Inclusion of right to livelihood as a fundamental right under the Indian Constitution

Article 21 of the Constitution of India, 1950, provides that, “No person shall be deprived of his life or personal liberty except according to procedure established by law”.

‘Life’ under Article 21 of the Constitution is not merely the physical act of breathing. It does not connote mere animal existence or continued drudgery through life. It has a much wider meaning which includes right to live with human dignity, right to livelihood, right to health, right to pollution free air, etc. Right to life is fundamental to our very existence without which we cannot live as human beings and includes all those aspects of life which go to make a person’s life meaningful, complete and worth living.

2Ellis, Frank; Rural Livelihoods and Diversity in Developing Countries. Oxford University Press, 2000.

5

CHAPTER I

Article 21 is the only article in the constitution which has received the widest possible interpretation. Under the canopy of Article 21, so many rights have found shelter, growth and nourishment.

The meaning and concept of personal liberty has been interpreted by the Supreme Court of India in its landmark ruling in Olga Tellis vs. Bombay Municipal Corporation. In this case, the Supreme Court stated that, “Any person who is deprived of his right to livelihood except according to just and fair procedure established by law can challenge the deprivation as offending the right to life conferred in Article 21”.

Olga Tellis and Ors vs. Bombay Municipal Corporation and Ors. (MANU/SC/0039/1985)

This decision was given by a five-judge bench of Supreme Court in Olga Tellis and Ors vs. Bombay Municipal Corporation and Ors., where the petitioners challenged certain provisions (Sections 312 to 314) of the Bombay Municipal Corporation Act, 1888, as being violative of Articles 14, 19 and 21 of the Constitution. The first two provisions insisted that the permission of the Municipal Commissioner had to be obtained before constructing permanent or temporary constructions on public streets/ways. The last provision, which was the most contentious one, gave the commissioner the power to evict, without notice, such occupants of public ways who had violated the other two provisions.

The petitioners consisted mostly of slum dwellers, pavement dwellers and some socially conscientious journalists. The pavement dwellers had come to the city for purposes of employment in various industries and had settled down on roads and pavements which gave them proximity to their places of work. They contended that if they were evicted, it would amount to depriving them of their livelihood and deprivation of livelihood was akin to deprivation of life itself which was guaranteed by Art. 21.

The Supreme Court, in its oft quoted ruling, affirmed that right to life included right to livelihood and eviction from their dwellings was indeed a deprivation of livelihood. Consequently, the decision to be made was whether the procedure involved in such deprivation was in fact just fair and reasonable, in order to bring it within the ambit of Article 21.

The decision of the Supreme Court in this case was influenced by the values of humanity. The eviction

orders were held valid under Article 14, and 19 of the constitution, but the ‘right to life’ was widened enough so as to bring the ‘right to livelihood’ within the purview of ‘right to life’ under Article 21 of the Constitution. The Supreme Court held that the respondents (Bombay Municipal Corporation) must provide alternative shelter to the petitioners before eviction from the pavements.

The right to livelihood is a fundamental right and any infringement of such rights by passage of law or due to commitment given by the state to outside agencies needs to be restituted based on the capability of the affected person and the primary person responsible for this restitution is the state itself. Hence all solution to alternative livelihood needs to be holistic and no individual groups or persons should be sacrificed for what some may determine as the common good.

Drawing lessons from the Supreme Court

directive for the Tobacco Industry

A somewhat similar situation or problem is

building up in the tobacco industry in

India, providing employment to nearly 38

million people with most of them engaged

in agricultural activities. Tobacco is also

the major contributor of rural income and

source of livelihood for people living in the

areas where the crop is cultivated. The

current anti-tobacco measures aimed at

reducing the demand have not addressed

issues of providing an alternative

livelihood for persons involved in tobacco

growing. The scenario faced by the Indian

tobacco industry over fears of loss of

livelihood by tobacco growers, it is only

relevant that the stipulations made by the

Supreme Court in the Olga Tellis case be

taken into consideration before a policy

intervention that could affect the

livelihoods of millions of people making a

living through this industry. As stipulated

by the apex court, right to life includes the

right to livelihood, which when seen from

the perspective of the tobacco farmers is

the provision of an alternative livelihood

mechanism.

6

CHAPTER I

Assessing the economic losses due to reallocation of resources

As discussed earlier, the tobacco industry workers and businessmen spread across major tobacco producing states will find it difficult to switch to other activities and will have a more difficult time. It is, important, therefore, to map the losses incurred due to reallocation of resources, in order to derive alternative mechanisms to redress them.

Economists use the concept of Economic Rent to measure the extent of economic losses due to reallocation of resources. Economic rent is the difference between what a factor of production earns in its current employment (wages, interest or rental payments) and the factor’s opportunity cost (what it could earn in its best alternative use). Workers, land, machines, or other factors that are specialised in tobacco production or farmers who have made large investments to increase their farms’ productivity will have much higher earnings in tobacco production than they would in an

alternative occupation. For example, seniority, training, and experience on the job make workers more productive and more highly paid in a particular job than they would be elsewhere. If the experience and skills are not transferable to other industries, then economic rent is high, and workers’ “welfare loss” is large if they are forced to shift to another activity. Workers with general skills, as found in demand by non-tobacco industries and businesses will have small economic rents and welfare losses. The current study tries to identify the types of workers, businesses, farms and communities that are most vulnerable to loss of

3tobacco income.

3 Tobacco and the Economy: Farms, Jobs, and Communities, By H. Frederick Gale Jr., Linda Foreman, and Thomas Capehart, Economic Research Service, U.S.,

Department of Agriculture, Agricultural Economic Report No. 789.pg 15

3 Tobacco and the Economy: Farms, Jobs, and Communities, By H. Frederick Gale Jr., Linda Foreman, and Thomas Capehart, Economic Research Service, U.S.,

Department of Agriculture, Agricultural Economic Report No. 789.pg 15

7

CHAPTER I

SOCIOECONOMIC IMPACT OF TOBACCO IN INDIA

CHAPTER II

4 Approach to Twelfth Plan, Planning Commission 5 Working paper, The World Tobacco Industry: Trends and Prospects, ILO, Geneva, 2002, pg.26 Starred question no. 58 in Lok Sabha replied by Mr. Anand Sharma on tobacco products on 26/11/127 Tobacco in Indian economy, CTRI, Rajahmundhry

According to Census 2011, Registrar General of India, Ministry of Home Affairs, an estimated 833 million people representing nearly 65% of the population, live in rural India. A large proportion of them are either wholly or significantly dependant for their livelihoods on farm activity – be it crop agriculture, horticulture, animal husbandry or

4fisheries. The expansion of income opportunities in the farm sector and a progressive absorption into non-agricultural activity is the most potent weapon in the war against poverty. The key economic questions facing policymakers in India, relating to tobacco or any other industry, include issues of relative sizes of the industry, the benefits and costs arising out of such policy changes, their distributional impact on the human and environmental groups who bear the costs and those who benefit.

Tobacco production is an important source of livelihood for a number of Indian farmers in some of the poorest areas of the country. In many regions of India, tobacco is often the sole source of direct and indirect income for some of the vulnerable sections of society. Governments around the world, including India, support tobacco growing for reasons ranging from economic (owing to its contribution to government revenue), social (as it provides employment to many people), strategic (they don’t want to depend on imports in times of war or crisis) and political (tobacco farmers may have a decisive

5vote in a decentralised political system).

In this study, we look at the economic and social contribution of tobacco to various state economies especially those of Andhra Pradesh, Karnataka and Gujarat from cultivation to trade of tobacco, the direct and indirect economic acceleration such produce gives to livelihood of people and communities, income of the Government from foreign exchange and tax revenues, while also evaluating the alternative livelihood opportunities which exist for people engaged with the industry.

Employment in tobacco industry

The tobacco industry in India and around the world comprises a group of economic activities covering cultivation of raw tobacco, manufacturing and

processing, distribution, and retailing of tobacco leaf and tobacco products. Tobacco growing, processing and exports make a significant contribution to national employment and national income. The other tertiary activities in the industry include entities dealing with agricultural inputs like seeds, fertilisers, pesticides, etc., and those involved with packing, transportation and exports.

Tobacco provides direct and indirect employment to 638 million people . In this 38 million, around 75%

are in the agricultural sector, with 6 million farmers

and 20 million farm labour engaged in tobacco

farming, besides 10 million people working in

processing, manufacturing and exports. It is

estimated that there are 5 million people who work

in retailing and trading.

Central Tobacco Research Institute (CTRI) of the

Government of India estimates that in India, bidi

rolling alone provides employment to 4.8 million

people including 2.2 million tribals who are involved

in tendu leaf collection and states that “the main

beneficiaries of tobacco trade are the small and

marginal framers, rural women, tribal youth and 7weaker sections of the society” .

(in million)

Employment

Farmers Farm Labour Bidi Workers

Tendu Leaf Pluckers Traders & Retailers

6

20

4.8

2.2

5

8

Agricultural employment in tobacco

In India, tobacco is grown on 0.45 M ha of area (accounting for only 0.31% of net cultivated area in the country) with 750 M kg production. Tobacco is a labour intensive crop and is grown predominantly by small holders of land. The labour intensity of tobacco is evident as leaf harvesting and curing which are primarily manual activities, are the two crucial phases in tobacco production. Tobacco is cultivated in the same way as other agricultural products. Seeds are sown in cold frames or hotbeds to prevent attacks from insects, and then transplanted into the fields. Tobacco is an annual crop, which is usually harvested mechanically or by hand. After harvest, tobacco is stored for curing, which allows for the slow oxidation and degradation of carotenoids.

Impact on livelihood

For tobacco growers in India, it is a comparatively remunerative crop when compared to food crops such as grains and cereals. It grows on soil of poor fertility and can withstand variations in weather conditions better than other crops, especially in the

8states of Andhra Pradesh, Karnataka and Gujarat . Problems of pests and disease are much less severe in tobacco than for alternative crops such as

9cotton, chillies and groundnut . The Flue Cured Virginia (FCV) tobacco is grown in India in four agro climatic zones, namely, Traditional Black Soils (TBS), Northern Light Soils (NLS) and Southern Light Soils (SLS) in Andhra Pradesh, and Karnataka Light Soils (KLS) in Karnataka. However, to suit the quality requirements in internal and export markets, cultivation of FCV is encouraged in light soils in Karnataka and Andhra Pradesh.

The soil characteristics, the cultivation practices and the quality of the tobacco grown are entirely different from one region to the other. The different styles of tobacco produced in different zones meet the demands of the customers of different countries. As a result of this, the tobacco crops give higher returns to the farmers in states like Andhra

10Pradesh and Karnataka .

The institutional structure of tobacco plays an important role in protecting the livelihood of tobacco farmers. The Flue Cured Virginia (FCV) tobacco has a well-organised marketing system through the Tobacco Board which is body of Ministry of Commerce, Government of India. Tobacco has a short growing season which enables farmers to grow other crops such as green gram, black gram

and certain varieties of rice outside the tobacco 11growing season . In the below figure we can see

the consistent growth in terms of productivity of tobacco in the last three decades.

Importance of tobacco for tribals, women and vulnerable groups

Tobacco growers in India are of the view that

tobacco cultivation has improved their situation,

raised their levels of income and ultimately helped

them to increase household food security when

compared to growing other crops.

A study conducted by the University of Hyderabad

on the impact of tobacco cultivation on Dalit

agricultural labourers in the Prakasam district of 12Andhra Pradesh has found that at an individual

level, the higher incomes of individual families from

tobacco cultivation help in equipping their houses,

educating their children who then secured jobs and

acquiring new skills that helped them in

diversification of occupation. At the caste or

community level, the higher incomes and new

economic relations have a bearing at the family

level, as pointed out in the earlier section. At the

same time, Dalits have moved to a new level of

consciousness about caste and community that

unite them to fight against discrimination and the

practice of untouchability prevalent in the villages.

This has altered the age-old discrimination and

inferior status conferred on them. Finally, the

improved economy, education and consciousness of

discrimination have brought significant changes in

the inter-caste relations at the village level.

1800

1600

1400

1200

1000

800

600

400

200

0

415 428 398487

588662

1171

1377

1702

Area (000 ha) Production (million kg) Productivity (kg/ha)

1981 - 1990 1991 - 2000 2001 - 2010

Source - CTRI Vision 2030

8 Issues in the global tobacco economy: Selected case studies, FAO, 2003 9

Socioeconomic impact of FCV in Andhra Pradesh, CTRI, 200410 CTRI, Soils & Climate

11 Potential impact of supply-side action, ISID, 2004

12 Chikala,The Impact of Tobacco Cultivation on Dalit Agricultural Labourers in

Prakasam District of Andhra Pradesh, India, University of Hyderabad, 2012

9

CHAPTER II

Women and bidi workers

There are a number of studies that deal with the large number of women who work in the bidi industry. They work long hours and could possibly be at health risk from the tobacco plant. Bidi rolling also involves child labour. At times they do not receive fair wages for their labour and they are subject to exploitation by middlemen. There is very little research either by the Government or the NGOs on what are the possible channels of livelihood that are viable and provide similar economic benefits to such village women.

A study, Income and Expenditure Pattern of Women Beedi Workers in Radhapuram Taluk of Tirunelveli District, Tamil Nadu, India, by R. Thanga Selvan and Dr. D. Jacqulin Pon Mabel Ph.D. Scholar, Department of Commerce, Nagarcoil (2013) finds that “The occupation of beedi making is a boon to the people in Radhapuram Taluk who were formerly agriculturalists. The agricultural work has been almost nil due to acute shortage of rainfall and negligible volume of water in the dug wells. Even though beedi rolling is an alternative employment opportunity to the women in the rural area they are able to earn a substandard income compared to other sectors. This is due to the exploitation of the company’s management.”

Bidi rolling provides employment to about 40 million people, 80% of whom are women whose alternatives to sustained livelihood are limited given the economic and other conditions of the village. The effort to find alternative living needs to be holistic as it is a source of livelihood for some of the most vulnerable sections who have very few options.

Tribal women and tendu leaves

The tendu tree (Diospyros melanoxylon) is found widely in Madhya Pradesh,

Chhattisgarh, Odisha, Maharashtra and some

parts of Andhra Pradesh. Leaves plucked from its shrubs are used to wrap bidi. Tendu leaves come under Minor Forest

Produce (MFP) and according to a World

Bank study, it supports 275 million people

13although a lot of other items too come under MFP .

A study on tendu-kendu leaf based livelihood and

possible institutional alternative with special focus

on FRA, “Major Kendu Potential areas of Odisha”

(2008-09) by Nihar Dash states, “Kendu leaf (KL)

plays an important role for the socioeconomic

development of the tribal and Dalit of India. Kendu

leaf (KL) plucking provides employment and means

of livelihood to millions of families spread across

the country. Poverty, illiteracy and a high degree of

unemployment are cited as factors for womenfolk

and children taking to Kendu Leaf (KL) plucking in a

big way. Kendu leaf provides employment

opportunities for millions of tribal, Harijans (Dalits)

and other landless people during summer when

there is no agricultural work or opportunities of

wage earnings. In terms of coverage, dependence

and revenue to the state exchequer, KL is the most

valuable and important non-timber forest produces

available in the State. Odisha is the largest

producer of processed KL after Madhya Pradesh

and accounts for 15% of total KL people producing

best quality leaves in the country. This trade creates

an estimated 15 million man-days of work in the

state. After agriculture this trade accounts for

largest number of employment generation. The total

turnover of KL trade in Odisha is in the range of

`150 crores annually.”

It is estimated that tendu leaves provide

employment of 90 days to 7.5 million people, who

are mainly tribal women and landless persons in

some of the poorest districts of India. A study by

Nabakrushna Choudhury Centre for Development

Studies carried out in two villages in Bolangir and

Angul districts of Odisha in1998; found that the

tribals in that area derived 20-40% of their total

household income from tendu leaves collection. It

concludes that poorer a tribal household, more is

the economic dependence on tendu leaves.

The economic and development indicators in the

areas where tendu is a significant Non-Timber

Forest Products (NTFP), have been dismal for the

period after independence and all governmental

and social measures have not been able to make

any significant difference to the lives of people

living in abject poverty.

Any decision to curtail their livelihood, without

providing them with a viable alternative would be

grossly unjust and socially inequitable.

13 http://www.cseindia.org/userfiles/Major%20battle%20over%20minor%20produce.pdf

tendu leaves provide

employment of 90

days to 7.5 million

people

10

CHAPTER II

Major tobacco producing states

Cigarette, bidi, chewing, hookah, cigar, cheroot,

snuff, natu, burley, etc., are the various types of

tobacco grown in different parts of the country.

The plant characteristics, soil and climatic

requirements, agronomic practices, harvesting and

curing techniques, are all different for different

types of tobacco grown in different zones. Andhra

Pradesh, Gujarat and Karnataka together have 85%

of the country’s tobacco growing areas. Bidi tobacco

is the major tobacco grown in the country (33%);

other tobaccos grown are Virginia Fire Cured - VFC

(23%), Natu (12%), Cigar and Cheroot (3%), Hookah

tobacco (14%), Chewing tobacco (13%) and Snuff

tobacco (2%).

There are 23 major tobacco growing districts in the

country. Natu tobacco is grown in 5 districts of

Andhra Pradesh. Hookah tobacco is grown in Bihar,

West Bengal, Gujarat and Uttar Pradesh. Chewing

tobacco is grown in Tamil Nadu, West Bengal, Uttar

Pradesh and Odisha. Tobacco leaf processing is not

mechanised except for VFC tobacco. Andhra

Pradesh and Gujarat together contribute 87% of 14tobacco waste generated in India.

Types of Tobacco grown in India

Bidi Natu VFC Cigar & Cheroot

Hookah Chewing Snuff

Source – Directorate of Economics & Statistics, Ministry of Agriculture

Andhra Pradesh contributes nearly 52% in the total production of tobacco in India, while Gujarat is second in terms of quantity, but in terms of area Karnataka has more expanse which grow tobacco. The tobacco in Gujarat is high in terms of weight. Uttar Pradesh also grows tobacco which is for domestic consumption.

Contribution to rural economy

About 15 states in the country grow tobacco significantly influencing the economy and prosperity

15of the farming community . In India, tobacco cultivation, trade and processing is largely undertaken in the rural areas. In Andhra Pradesh, it is concentrated in East Godavari, West Godavari, Khammam, Krishna, Guntur, Prakasam, Nellore, Karimnagar and Warangal districts. But unlike other crops, tobacco has been found to have high value addition; productivity improvements have been occurring steadily which is evident in the table above. The sale of tobacco leaf potentially generates important public revenue as well as cash flow for farmers and rural communities, and the prices received by tobacco growers are relatively stable over time. Along with this, market support such as the Tobacco Board’s auction system, Minimum Support Price (MSP), combined with the income that tobacco cultivation generates for farmers, sets the standard for large contribution to rural economies of some states.

33%

12%23%

14%

3%

13%

2%

Area under Tobacco cultivation

Andhra Pradesh

Gujarat

Karnataka

Uttar Pradesh

Bihar

Tamil Nadu

Maharashtra

Others

45%

14%

26%

5%

2%

5%

2% 1%

Source – Directorate of Economics & Statistics, Ministry of Agriculture

14 http://www.tifac.org.in/offer/tlbo/rep/st158.htm 15 CTRI Website

11

CHAPTER II

According to CTRI, tobacco is grown in India by small and marginal farmers, mainly in non-irrigated soils, on land holdings of less than 2.5 hectares. Thousands of small and marginal farmers grow cigarette tobaccos and over 6 million grow non-cigarette tobaccos. No crop other than cigarette tobacco gives the farmer as attractive a return consistently in similar agro-climatic conditions available in the state of Andhra Pradesh and Karnataka. Cigarette tobaccos offer returns more than two times those of non-cigarette tobaccos and comprise mostly the flue cured variety, which is sold through government-conducted auction platforms with a Minimum Guaranteed Price (MGP) to the farmers. As a result, the better the quality of tobacco the farmer produces, the higher his return, with a minimum return guaranteed by the MGP

16system.

The tobacco industry has wide-ranging effects throughout the economy, affecting not only farms and manufacturers, but also wholesale businesses and small retail stores located in rural areas. Businesses in other industries that supply intermediate goods, inputs and services also rely on tobacco. These include companies in diverse sectors such as warehousing, paper, metal products, machinery manufacturing and transportation.

Retail activity is also major contributor and distributed widely across the rural and urban areas in proportion to the number of smokers in each locality. The tobacco sector contributes to the states’ economies through crop production and to the exchequer through excise duty which is around

17`16,000 crores .

Informal labour markets and lower social floor

As the marketing and manufacturing of bidi tobacco is not regulated, there are many issues associated with such informal economic environment. In India, around 4 million bidi workers including a large number of women earn their living from the informal economy. Despite the existence of labour laws covering bidi and cigar workers, it was a struggle to gain protection of the law because bidi workers were paid on a per-job basis for work to be done at home and an employment relationship was difficult to prove. Similar issues are also faced by agricultural workers in the tobacco sector who are daily wage earners. Finding alternative employment for these workers is the biggest challenge since the workers need new skills to sustain themselves.

Workers in the bidi industry are covered by General Labour Legislation; there are two laws specific to the bidi industry:

• The Bidi and Cigar Workers’ Welfare Act

• The Bidi and Cigar Workers’ (Conditions of Work) Act

The Welfare Act is meant to provide basic benefits such as health care, education, insurance, housing assistance, scholarships, drinking water supplies, and provides 12 hospitals and 276 dispensaries across the country for bidi workers.

These acts provide for the constitution of the Bidi Workers’ Welfare Fund from out of the cess collected by way of excise duty on manufactured bidis from the registered companies manufacturing more than 20 lakh bidis per annum. The Ministry of Labour administers the fund through nine regional offices covering 14 states/union territories in the country.

There have been some improvements in certain areas, namely in occupational safety and health, particularly in packaging and distribution, in access to education for the children of bidi workers and in reduction of child labour. The cooperative movement in the State of Kerala and the existence of the Self-Employed Women’s Association are some of the other examples of positive factors in the industry.

Tax collection from tobacco

Central excise duty on tobacco products increases every year as a measure to control the use of tobacco products. Tobacco contributes over `21,000 crores to the national exchequer through

foreign exchange earnings and internal excise revenue (CTRI, Vision 2050).

In developed countries, there is a declining trend while in the developing countries there is an increasing trend. The increase in consumption in developing countries is mainly due to high population and income growth. Cigarette production in developing countries is surpassing the production level of developed countries.

Exports of tobacco and its effect on rural livelihood

Tobacco accounts for about 10% of the total exports of agricultural produce from India and hence is a critical contributor to the basket of agricultural exports. The country accounts for about 6% by volume and 0.7% by value of the world tobacco

18trade .

12

16Since 1988-89, the Tobacco Board has introduced the concept of Minimum Guaranteed Prices (MGP) under which system the traders will indicate before plantation, the MGP they will be

willing to pay to the growers for VFC tobacco in the ensuing auctions. The Minimum Guaranteed Prices are higher than the Minimum Support Prices and are remunerative to growers. The MGP is applicable for a normal crop. However, this is only a gentleman’s agreement which does not have any statutory backing. 17 18

Parliament question no 4970,7/5/2012 replied by Shri Scindia CTRI Vision 2050

CHAPTER II

Countries 2010 2011 2012

Argentina 87 74 85

Brazil 708 590 630

PRC 2,354 2,580 2,580

USA 169 204 230

India 278 273 276

Zimbabwe 132 144 165

Tanzania 122 70 125

Bangladesh 87 90 95

Philippines 45 44 47

Indonesia 37 48 48

19 Tobacco Board statistics

Estimated Flue Cured production by top 10 countries (2010- 2012P) in Million green kgs.

Over 60% of the Global Production of FCV is

controlled by two countries i.e. China and Brazil and

over the last three years the production levels in the

world have generally remained constant. The major

countries, which produce the crop have not made

any significant decrease in production. The global

market is in an equilibrium, which constitutes a

small number of countries. In case any country, say

India withdraws from the market, the demand will

be met by other countries. Any unilateral withdrawal

from the global markets, will be detrimental to the

farmers of India, who due to soil conditions and

other agro climatic reasons do not have any viable

alternative crop to bank upon.

Rural employment and tobacco exports

The tobacco industry employs about 38 million

people and around 75% are engaged in the

agricultural sector. This can be further broken down

to about 6 million farmers and 20 million farm

labour engaged in tobacco farming. Tobacco Board

estimates that there are around 90,000 registered

tobacco growers in Andhra Pradesh and Karnataka.

The per capita export earnings of FCV tobacco

growers and the resultant contribution to rural

economy in two states is about `4,50,000 p.a. In

terms of the entire exports the per capita income

from exports translates into `2,000 a year for the

entire 26 million people engaged in growing

tobacco in India.

4000

3000

2000

1000

1475

27083374 3192 3090

3831

2007/0

8

2008/09

2009/10

2010/1

1

2011/1

2

2012/1

3

Unmanufactured tobacco

or leaf tobacco growth

in exports in last five years

export of unmanufactured

tobacco and tobacco products

from India has touched a record

high of `5,000 crore in

2012-13, a three-fold increase

from `1,700 crore in 2007

Source – Universal leaf tobacco company, USA

According to Tobacco Board, Ministry of Commerce

and Industry, Government of India data, export of

unmanufactured tobacco and tobacco products

from India has touched a record high of `5,000

crore in 2012-13, a three-fold increase from

`1,700 crore in 2007. Exports of unmanufactured

tobacco and tobacco products have increased in

quantity terms on year on year basis to 2,63,575

tons in 2012-13 from 2,40,395 tons during 2011-

12. The same have increased by about 20% in

rupee terms and by 5% in dollar terms to nearly 19` 5,000 crores and US$ 914 million respectively .

Chart compiled based on statistics of

tobacco board (in Rupees in crores)

The strategy paper of the Ministry of Commerce and

Industry, Government of India, forecasts that

exports of tobacco from India to grow at 7% in the

2013-14 in spite of the restrictions on the growth of

tobacco under the obligations set out by the World

Health Organisation Framework Convention on

Tobacco Control. The strategic intent of the Ministry

translates into taking forward a growth of 21% in

Compounded Annual Growth Rate (CAGR) between

2007 and 2013 to a greater level.

13

CHAPTER II

20 Vision 2050

Tobacco industry in India faces unfair challenges

from some of the major tobacco growing countries

like USA, Argentina, Mozambique and Zimbabwe

which have not yet ratified the Framework

Convention on Tobacco Control (FCTC). Meanwhile

FCTC instrument has been adopted by 177

countries—representing 87% of global

population—making it one of the most rapidly-

embraced treaties in history. Many of the tobacco

growing countries that have not yet ratified FCTC

(which includes USA, Argentina, Indonesia,

Zimbabwe, Malawi) have had initiatives in place

that increase their production by 24% in the last 3

years.

Tobacco is quite important to some economies like

Malawi and Zimbabwe as tobacco production

accounts for, respectively, 17% and 43% of

agricultural GDP and tobacco exports account for

50% and 35% of national exports in these two

countries. Countries with high dependence on

tobacco will unlikely voluntarily reduce its

production, unless they find an economically viable

alternative in the short and medium term. The

markets will be skewed and those countries which

are not a signatory to the convention could tilt the

market in their favour. In that case the farmers in

India will be directly affected by such turn of events.

Way Forward: India’s institutional level effort

for rural livelihood enhancement

A study titled ‘Strategy for Doubling Exports in Next

Three Years (2011-12 to 2013-14)’ by the Ministry

of Commerce and Industry, Government of India,

suggests the following road map to boost exports of

tobacco from India:

• Introduction of e-auction system in all

auction platforms

• Accessing of important markets like china

• Separate quota for import of Indian tobacco

by the USA

• Increasing percentage share of exports vis-a-

vis domestic production through R&D

• Aggressive marketing and greater market

access

Tobacco Board has implemented e-Auction System

for export promotion of FCV tobacco in 29 Auction

Platforms in Andhra Pradesh and Karnataka. In its

board meeting held in April 2013 in Bengaluru the

board has also resolved to approach the Ministry of

External Affairs, through Ministry of Commerce and

Industry to activate commercial consulates in the

countries where FCV tobacco is cultivated and

procure details of crop size, quantity of tobacco

produced, market prices and other related

information.

In case of FCV tobacco, the Government of India

and the Tobacco Board announce a Minimum

Support Price (MSP) from year to year with the

objective of protecting the interests of the growers

of FCV tobacco. There is a need to establish an

organised export promotion system for all types of

tobacco especially burley tobacco so that Indian

tobacco can achieve a significant share in the

international market.

The average productivity of tobacco in India though

steadily increased to around 1,600 kg/ha for FCV

and 2,000 kg/ha for non-FCV, continues to be far

below the productivity levels in other countries such

as Brazil, China and USA owing primarily to various

abiotic and biotic stresses. Improving tobacco

productivity and quality to increase net returns for

farmers and to enhance global competitiveness is a

daunting challenge. It is targeted to improve the leaf

yield potential of tobacco to 4.0 t/ha in FCV and 206.0 t/ha in non-FCV tobacco .

Sustained research and developmental efforts by

the scientists of CTRI have resulted in evolving 90

high yielding varieties (HYV) and appropriate agro-

technologies, which have made a significant impact

on tobacco production, marketing and export

earnings. As a result of adoption of HYV and proven

production and protection technologies, there has

been a quantum jump in the average productivity

levels in FCV and non-FCV tobacco types. Research

in growing tobacco in various agro climatic zones

within India could be another experiment CTRI may

look at, with a view of enhancing both yield and crop

quality, and resultant realization to make Indian

tobacco more valuable.

Improvement in physical and chemical quality

attributes of the tobacco leaf including lower levels

of harmful constituents like Tobacco-specific

Nitrosamines (TSNA), tar etc. has made the place of

14

CHAPTER II

losses and impact on livelihood of millions. The

fiscal impact will come in the form of lower taxes

and duties; and loss of foreign exchange that

comes through lower exports was `5,000 crore in

the fiscal year 2013 and is expected to grow at a

rate of 11% based on Government’s estimates.

In this scenario, if India withdraws from this market

wholly or partially, the market will be catered by

countries which are not bound by any convention.

This would be to the detriment of Indian tobacco

growers, who in the absence of alternative

livelihood would also lose the benefit that accrues

from exports.

Tobacco farmers need to be included in the

implementation of the plan as it affects livelihoods

of millions in the trade and any overall growth in

exports will be beneficial to the entire economy.

Indian tobacco secure in the international market

as ‘quality filler’. Significant reduction in cost of

production achieved through the adoption of HYV

and improved crop management strategies gave a

competitive edge to Indian tobacco in the 21international market .

The disequilibrium in the global market created by

countries like India who have ratified FCTC will shift

the growers market to Argentina, Zimbabwe,

Mozambique, Malawi and Indonesia as discussed

above. In the absence of coordinated efforts by

countries who have neither ratified nor signed any

treaty for limiting production of tobacco will

ultimately lead to trade disputes and illegal 22smuggling . This would not change the overall

supply of tobacco products but countries like India

will face the prospect of seeing large number of job

21 Tobacco in Indian economy , CTRI

22 Beyond ratification, CSIS global health policy centre , 2010

15

CHAPTER II

IN SEARCH OF AN ALTERNATIVE LIVELIHOOD FOR TOBACCO FARMERS

CHAPTER III

Tobacco is the largest non-food crop in terms of

monetary value in the world and economic

imperatives make the search for a solution for an

effective alternative livelihood of the farmers a

global challenge. Nevertheless, many countries,

including the world’s largest producers, are taking

steps to find alternatives to tobacco growing. A

number of proposed interventions for economically

sustainable alternatives to tobacco have been

identified in studies in various regions of the 23world . These studies show that the greater the

profitability of alternative crops, the more are the

chances of farmers willing to stop growing tobacco,

provided that there are sustained economic

opportunities and that the necessary market

support is provided. Economic and social support

are the main arguments which are under debate in

major tobacco growing countries including India,

and the solutions need to go beyond economic

returns and consider social dimensions as an

equally significant parameter.

Global alternatives and diversification efforts

for tobacco

Tobacco diversification efforts are in progress in

various tobacco growing countries like Argentina,

Malawi, Zimbabwe, Kenya, Brazil, Bangladesh,

Malaysia and India. In the year 2005 after ratifying

the FCTC, Brazil launched its Programa Nacional de

Diversificação em Áreas Cultivadas com Tabaco,

which is one of the most comprehensive state-led

initiatives specifically designed to address articles

17 and 18 of FCTC. The programme follows an

integrated approach to diversification, not solely

aiming at replacing tobacco with a single other cash

crop but also exploring possibilities for small-scale

farmers to improve self-reliance and food security

through the provision of technical training and

assistance in other supplementary income streams

ranging from poultry farming, aquaculture, and bee

keeping to dairy farming.

Rather than focusing on merely replacing tobacco

with alternative crops, the Ministry of Health in

Mexico has worked in conjunction with the Ministry

of Agriculture - The Secretariat of Agriculture,

Livestock, Rural Development, Fisheries and Food

(SAGARPA) to pilot research into viable substitution

strategies for tobacco farmers in the states of

Chiapas, Nayarit and Veracruz. Alternative crops

such as tomato, green chilli pepper, papaya, corn,

sorghum and rice have been identified for

diversification. In 2009, SAGARPA helped finance

the conversion of 1,900 ha of tobacco-cultivated

land, and since 2010, a special fund in the

SAGARPA household budget has been dedicated to 24the conversion of tobacco-cultivated areas .

The efforts around the globe for tobacco

diversification reflect the intentions of the tobacco

producing countries aimed at integrated and

carefully monitored programs. Moreover, these

efforts set an example for other countries to follow

diversification in tobacco with an open mind.

However, it is evident from the above examples that

diversification of tobacco requires a coordinated

effort from all stakeholders of the sector and it will

gradually lead to successful results aimed at

livelihood diversification of the tobacco industry.

The current efforts are still preliminary and in a pilot

phase. Hence, the actual results may significantly

vary when implemented on a full scale.

The search for alternative livelihood in India

Tobacco is a drought tolerant, hardy and short

duration crop which can be grown where other

crops cannot be cultivated profitably. Best quality

tobacco can be grown only in soils of low fertility

without the need of comprehensive irrigation or a

perennial water source. Tobacco in India is grown

mostly as a rain fed crop. Over a period of time CTRI

and its research stations have conducted a number

of experiments on alternative crops to tobacco,

tobacco based cropping systems, and non-tobacco 25based cropping systems . The results have had

varied success and various socioeconomic factors

play a large role in defining a sustainable alternative

livelihood to farmers.

23 Conference of the Parties to the WHO Framework Convention on Tobacco Control, fifth session, Korea, July 2012

24 Sonja von Eichborn, Laure Norger, Alternative Livelihoods to Tobacco. Approaches and Experiences, May 201225 Tobacco status paper, Directorate of Extension, Ministry of Agriculture, Chennai, 2006

16

Framework for defining alternative livelihood

for tobacco farmers

FCTC has added a new dimension to the cultivation

of tobacco crops around the world. The treaty

envisages non-price, price and tax measures to

reduce the supply and demand for tobacco across

the world. India being a signatory to the FCTC treaty,

it is imperative that the area under tobacco

cultivation ought to be reduced. In order to find

economically sustainable alternatives to tobacco

growing, it is necessary to address not only income

and crop profitability but all aspects of farmers’

livelihoods.

A framework for alternative livelihoods that goes

beyond crop profitability to address the problem

holistically could form a bridge between academic

findings and policy decisions. The livelihood

approach is considered to be a good approach to

implementing Articles 17 and 18 of the WHO FCTC

along with economically sustainable alternatives to

tobacco growing or crop diversification.

The aims of the livelihood approach are:

• To promote the establishment of innovative

mechanisms for the development of

sustainable alternative livelihoods

• To build up development programmes

connected with the promotion of food

security and feasible markets that cover all

aspects of the alternatives to tobacco

growing, including economic viability and

environmental protection. Government

agencies, particularly those with a strong

influence in rural areas, have an important

role to play in supporting the diversification

of livelihoods in tobacco growing regions,

through an array of policies and measures,

including the provision of training for tobacco

workers and growers and their families.

Policies and programmes for shifting to

alternative livelihoods may be planned in a

time-bound and phased manner.

• To develop simultaneous rehabilitation

programmes for growers and workers and

share the information with relevant

stakeholders. The costs of adjusting supply

as demand diminishes will be stretched out

over decades. Thus, the transition costs will

also be spread over a long period. Countries should

orient educational programmes, information

and data gathering and information systems

in order to prevent any attempt to misinform

farmers and the population as a whole. The

implementation of these policy options

should promote the development of

sustainable alternative livelihoods for

tobacco growers and workers. Tobacco

growing countries should fix realistic goals

and targets depending on their prevailing

condition and capacity to implement

strategies to provide alternative livelihood for

growers and workers.

Promoting alternative livelihoods is a complex

socioeconomic issue rather than a simple technical

issue. The economic feasibility of alternative crops

is often the key to inducing small tobacco farmers

to switch from tobacco production. However, since

tobacco also generates substantial revenue for

governments, especially local governments, the

political will to control tobacco production may be

inadequate in some cases even if a cash crop can

produce higher profit than tobacco for farmers. In

order to fully implement Articles 17 and 18 of the

WHO FCTC, a systematic approach must be used to

establish new value-added chains for tobacco

farmer communities that also provide incentives 26and beneficial effects to society as a whole .

The activities for diversification include:

• Promoting research

• Developing educational and training

programmes for workers and growers

• Removing obstacles to diversification or the

shift to alternatives to tobacco farming

• Curtailing policies that promote and support

tobacco farming

• Identifying and regulating tobacco industry

strategies that promote tobacco farming and

the manufacture of tobacco products

• Mainstreaming alternative crops/livelihood

options into government schemes

• Establishing mechanisms within the existing

system to support alternative livelihoods

• Setting up information and support centres

for alternative livelihoods

26 Economically sustainable alternatives to tobacco growing (in relation to Articles 17 and 18 of the WHO Framework Convention on Tobacco Control) Report of the working group, 2012

17

CHAPTER III

FCTC ratification status and its impact on markets

thThe WHO FCTC opened for signature from 16 June ndto 22 June, 2003, in Geneva, and thereafter at the

United Nations Headquarters in New York, the thdepositary of the treaty, from 30 June, 2003, to

th29 June, 2004. The treaty, which is now closed for signature, has 168 signatories, including the European Community, which makes it one of the most widely embraced treaties in UN history. Member states that have signed the convention indicate that they will strive in good faith to ratify, accept or approve it, and show political commitment not to undermine the objectives set out in it.

However, some of the major tobacco growing countries like USA, Argentina and Switzerland have not ratified the FCTC till today. What is more, countries like Malawi, Indonesia and Zimbabwe have not even signed it. Tobacco is one of the significant commercial crops being cultivated across these countries, So there is anticipation that countries like India who have ratified FCTC will lose their market to Zimbabwe, Malawi and Indonesia and face the prospect of seeing millions of job losses, livelihood impact and forex losses.

The non-ratification by some countries and non-signatories therefore, creates an unfavourable environment for countries like India as the production will shift from India, which in turn will have a greater effect on exports and reduction in economic income of affected farmers.

The search for an alternative crop and its feasibility in India

India being signatory to the WHO FCTC, 2003, it has to find sustainable alternatives. The Regional Agriculture Research Station of Government of Andhra Pradesh at Lam, Guntur has also identified

27alternate crops for various types of soils .

CTRI has also conducted a number of pilots across various agro climatic zones to find alternatives to tobacco. According to CTRI, these alternative crops will be sustained by reducing the cost of cultivation, increasing the marketing and distribution system, implementing input use efficiency, mobilising resources, using information technology and agro-processing, implementing value addition of agricultural produce, increasing infrastructure facilities and promoting exports. It is felt that every effort should be made to popularise alternative crops/cropping sequences, wherever possible and feasible. It has also developed various tobacco-based cropping systems in the country.

A National Seminar on Alternative Crops to FCV Tobacco in Andhra Pradesh conducted by CTRI and Tobacco Board in September 2011 recommended that alternative crops and cropping systems can be cultivated along with integrated agri-based industries, such as cattle rearing, sheep rearing, vermicompost making, silk worm rearing, mushroom production, apiculture by following at least two crops in a single season in place of tobacco. It also recommended taking up an integrated farming and cropping system

28by tobacco farmers .

Examples of mechanisms to support alternative livelihoods

Action Implementation

Rural credit Investment and defrayment of costs – with an emphasis on credit forinvestment and with a grace period and terms consistent with thediversification or conversion programmes. Emphasis must be placed on credit programmes that enable value aggregation by the farmers themselves, by means of cooperative, associative or family agro-industries.

Food acquisition programmes These should allow purchase for institutional markets (such asschools, hospitals and prisons), besides enabling purchases forsimultaneous distribution and for the formation of buffer stocks.

Family farming price assurance As a way of securing income and associated with family farmingagrarian insurance.

Technical assistance and These should be comprehensive and qualified, and integrate state rural extension organisations, non-governmental organisations and the farmers who

are able to disseminate experience and knowledge.

Agrarian reform and credit These should take into account the fact that many tobacco growersare partners and leaseholders, or owners of very small land areas.

27 ibid28 Seminar proceedings of alternative crops conducted by CTRI, 2011

18

CHAPTER III

29 Annigeri V.B, Control of tobacco cultivation ,CMDR ,Dharwad,pg.18

A detailed discussion was held on management

practices of different alternative crops such as

maize, oil palm, cotton, pigeon pea, chilli, paddy,

sugarcane, mustard, chickpea, soybean, castor,

black gram and green gram. The two key

impediments that came up in the course of the

discussions was the lack of a marketing system for

such alternative crops and lack of facilitation by the

Government for inputs and loan facilities. In

consonance with the policy of Indian Council of

Agricultural Research (ICAR), future efforts will be

made to explore the diversification of tobacco for

use in food, pharma, flavouring industries.

Most farmers are aware of alternative crops and

their viability and risks when compared to tobacco.

They are also aware of the efficacy of the alternative

activities like dairy farming, horticulture, etc. The

decision to grow tobacco for them is a considered

one and hence the alternative solutions need to be

innovative and intelligent while focusing on

technologies and other factors that the farmers may

not have considered previously.

A study by Centre for Multi-disciplinary Development

Research (CMDR), Dharwad, Karnataka, generated

useful information in relation to alternative crops,

which can be grown based on soil and weather 29conditions of the area . Though farmers were

aware of some of the crops, the

newer variety of such crops

had better yields as

compared to the

traditional ones.

The first best

alternative

suggested by

CMDR was

sugarcane.

But in view

of restricted

irrigation

facility, the

farmers as well as

research team felt

that this option can be

considered only when adequate investment is made

in lift irrigation systems. Successful cultivation of

sugarcane in the tobacco belt of Karnataka will be

possible only when there is assured water supply

from neighbouring Maharashtra. Other alternative

crops suggested were

• Soybean

• Groundnut

• Onion

• Sunflower

The economic ecosystem providing the sustainability of the efforts needs to be built to ensure that the quest for alternatives moves beyond experimentation to a fair market place.

Alternative uses of tobacco

Conventionally, tobacco is used in the manufacture of cigarettes, bidis, chewing mixtures, cigars, cheroots, hookah tobacco paste, snuff, gutka, zarda and quiwam. However, tobacco is an identified source of phytochemicals having pharmaceutical, agricultural and industrial importance. Thus alternatively, tobacco can be the source for extraction on nicotine, alkaloid, solanesol, a trisesquitepena alcohol and organic acids (malic and citric). Apart from these chemicals, there are other possibilities such as protein recovery from green leaf, oil from seed, rutin (vitamin P) from cured leaf and furfural (industrial solvent) from stalk.

Proteins

Technology for recovery of protein from green tobacco leaf has been developed and this has been tested as a source of protein under laboratory conditions. Its efficiency is comparable to milk proteins and further research will be necessary for economically exploiting this strain.

Nicotine

A bench-scale technology employing ion-exchange resins was developed for recovery of 40% nicotine sulphate from the tobacco leaf. The product was tested and found to be effective in controlling different pests attacking various crops. Its action on Brown Plant Hopper (BPH) and Green Leaf Hopper (GLH) damaging paddy is particularly noteworthy. Commercialisation of this technology has not taken off as this product is banned in our country for internal consumption as a pesticide. Recent scientific evidence suggests that nicotine and nicotine-like compounds may slow or ameliorate the symptoms of certain diseases like Tourette’s Syndrome, Alzheimer’s and Parkinson’s diseases, Ulcerative Colitis and Attention Deficit Disorder (ADD).

Solanesol

A bench-scale technology was developed by CTRI for recovery of solanesol 95+% from tobacco leaf in a

Economically viable

and sustainable farming

systems need to be

developed in different

agro-ecological regions

of tobacco as an

alternative to

tobacco

19

CHAPTER III

collaborative programme with the Central Drug Research Institute, Lucknow. The project dealt with the possibility of synthesising new bioactive compounds starting from solanesol, which could lead to new drug development. A patent application is being filed for “Process for purification of solanesol (95+%) from crude/enriched extracts of tobacco green leaf/cured leaf tobacco waste”. There is considerable interest among the entrepreneurs in the technology and after obtaining the patent, the technology will be transferred as per ICAR guidelines. Solanesol is a base compound for synthesis of Vitamin K2 (antihemorrhagic vitamin), Vitamin E (anti-sterility vitamin) and coenzyme Q10 (physiologically active substance for treating cardiac insufficiency, muscular dystrophy, anaemia, etc).

Seed oils and organic acids

Bidi tobacco is more suitable for extraction of oil as its seed yields are higher than in other types of tobacco. Experiments are under progress to breed different varieties of bidi tobacco, which give more seed yield. Apart from utilisation of tobacco waste for recovery of nicotine sulphate and organic acids, the possibility of growing tobacco exclusively for recovery of phytochemicals is also being explored at CTRI. It is estimated from this study that 380 kg of crude protein, 87 kg of 40% nicotine sulphate, 18 kg of 95+% solanesol and 56 kg of seed oil could be recovered from the crop grown in an area of one hectare. Farming practices are to be modified to optimise the levels of the chemicals if tobacco is to be exclusively grown for alternative uses (extraction of chemicals) and CTRI has already initiated work in this direction.

Generally FCV tobacco is a better source for extraction of solanesol, while air-cured tobaccos like bidi, natu and chewing are ideal for recovery of nicotine, organic acids and seed oil. It has been identified that chewing tobacco variety ‘Abhirami’ and HDBRG tobacco are good sources for both nicotine and solanesol.

Recognising the importance of alternative uses of tobacco, the Tobacco Board, Guntur, has come up with a proposal to extend financial support for conducting pilot-plant studies on the bench-scale technologies for effective transfer of the technologies. Nicotine sulphate (40%) and solanesol (95+%) have been identified to have good export potential. Evolving proper marketing systems for the chemicals and their value-added products is essential for the success of the project.

Economically viable and sustainable farming systems need to be developed in different agro-ecological regions of tobacco as an alternative to tobacco. Tobacco is a source of several value-added chemicals of medicinal and industrial applications providing scope for alternative uses of tobacco.

Economics of alternative crops

While there is a nationwide anti-tobacco campaign for its effect on the health of users, solutions for reduction of tobacco supply need to be made in a manner that is holistic and equitable to all stakeholders, including the farmers, rollers, tribals and other marginalised sections of the society. Presently, there is a call for substitution of tobacco with other crops, but the research findings show that there is currently no economically viable alternative

20

Differences in net returns from tobacco and next best crop (Rupees per hectare)

State Crop giving next best returns (I) Differences in net returns between tobacco and (I)

Andhra Pradesh (Northern Black Soils)

Andhra Pradesh Chillies 875(Southern Black Soils)

Karnataka Cotton 4,500

Gujarat Pearl millet 2,306

Bihar Maize+ Potato 2,729

West Bengal Potato 5,134

Tamil Nadu Groundnut 2,825

Bengal gram 4,405

Source: Central Tobacco Research Institute

Table showing net economic returns from tobacco and possible crops for substitution (2006)

CHAPTER III

crop which can be grown under similar soil, water and climatic conditions, which provides similar socioeconomic return as tobacco to the farmer.

The quest for an effective and sustainable solution to growing tobacco needs to take into account the capabilities that the farmer has developed and the substitution efforts should not disadvantage the stakeholders from their current state of economic and social status and returns. The solutions should also not put them at higher risks of livelihood loss than that currently attached to tobacco.

The choice of alternative crops needs to ensure that the income and net returns are sufficient during unfavourable conditions such as drought and floods. The said crops should resist pests and diseases, utilise the nutrients efficiently and should result in higher yields. The crops should give regular income to the farmer annually and be readily marketable.

A farmer is aware of the opportunities that agro-based industries (cattle rearing, sheep rearing, vermicompost making, silk worm rearing, mushroom growing, apiculture, horticulture, floriculture, precision farming, etc.) provide them to

supplement the income from agriculture. The suggestions to supplement agriculture with complementing opportunities such as cattle farming do not provide any new or additional livelihood opportunities that do not already exist. The risks associated with undertaking a new line of activity have not been addressed under any of the categories suggested by the Government for substituting tobacco, neither has any road map been provided on what social security net will be provided to the stakeholders of tobacco when they move towards substitution with lower yielding, higher risk crops for which no marketing or crop support exists.

Are multiple cropping systems an alternative to tobacco?

Some recent inter-cropping trials and cropping

sequence studies indicate that it may be possible

that net returns accrued by growing two or more

crops can be higher than the returns obtained from

a sole crop of tobacco. Suggested remunerative

cropping systems to tobacco are given below.

Type of tobacco and zone Remunerative cropping systems

FCV tobacco – Northern Light Soils (NLS) Red gram + Groundnut + Green gram/

summer vegetables or

Groundnut + Maize - Green gram

FCV tobacco – Northern Black Soils (NBS) Rainfed agro-eco system: Maize- Bengal gram

Irrigated agro-eco system: Sugarcane (mono crop)

FCV tobacco – Central Black Soils (CBS) Soybean + Red gram or Maize -

Red gram

FCV tobacco – Southern Black Soils (SBS) Fallow – Bengal gram or Jowar – Mustard

FCV tobacco – Southern Light Soils (SLS) Groundnut – Red gram

FCV tobacco – Karnataka Light Soils (KLS) Cotton – Ragi or Cotton + Soybean or Chillies

Chewing tobacco – Tamil Nadu Onion – Annual Moringa

or Chillies – Annual Moringa

Chewing tobacco – Bihar Maize – Potato or Potato + Garlic

Chewing tobacco – West Bengal Jute – Aman paddy – Potato or

Jute – Aman paddy – Mustard

Bidi tobacco – Gujarat Cotton–Groundnut or Castor – Groundnut

(Summer)

Chewing and Hookah tobacco – Uttar Pradesh Maize – Potato

Source: http://www.ctri.org.in/pages/success.pdf

21

CHAPTER III

30 Press Information Bureau, Government of India (2009): Health Ministry engages CTRI for Alternative crops for Bidi and Chewing Tobacco.

http://pib.nic.in/newsite/erelease.aspx?relid=46867

A package of mixed cropping shift to other crops

with suitable crop insurance facilities, adequate

farm inputs for the alternative crops, adequate

marketing, facilities, etc., would be necessary to

ensure the success of the policy of gradual shift

from tobacco. However, in this case, the risk of

multiple cropping would need necessary market

support from the players which is key in determining

the viability of shifting.

Latest developments in search of alternatives

The Ministry of Health and Family Welfare

sanctioned in 2009 an outlay of `2.17 crore to

CTRI, Rajahmundhry, to undertake a pilot project on

“Alternative cropping system to bidi and chewing

tobacco” at Nandyal (Andhra Pradesh), Anand

(Gujarat), Dharmaj (Gujarat), Nipani (Karnataka),

Vedasandur (Tamil Nadu) and Dinhata (West

Bengal). The initiative was taken after consultation

with Indian Council of Agriculture of Research and

Central Tobacco Research Institute, 30Rajahmundhry .

The current efforts made by the Government to

scale up and rationalise the use of alternative crop

will not be sufficient to convince farmers to shift

and significant research in all aspects of cropping

has to be undertaken.

Apart from the technical feasibility issues of growing

alternative crops on a commercial basis, the

concerns of farmers regarding the economic

viability of an alternate crop to tobacco need to be

addressed. The studies done so far have only been

on a demonstration basis in ideal conditions, under

technical supervision with the balanced application

of fertiliser. The results need to be field-tested and

proven successful on a large scale so as to induce

tobacco-growing farmers to shift to these alternate

crops.

In India, efforts aimed at developing alternative

crops are commendable. Many projects have been

sanctioned. The approach of institutions in matters

related to alternative crops is documented in our

study which reflects that we need to focus more on

research and diversification efforts along with its

practical implementation.

Tobacco diversification initiatives need assistance

in carefully evaluating the social and economic

impacts on local commodity markets. When tobacco

farmers switch to alternatives, the increased supply

of the alternative commodity can push down local

prices, resulting in lower returns than expected and

harming local farmers who already grow the

commodity. For example, vegetable growers have

opposed proposals to assist tobacco farmers in

switching to vegetables, because this would push

down prices and the assistance would give an

unfair advantage to the former tobacco growers.

Another barrier to tobacco supplementation or

diversification frequently identified by farmers is

“lack of capital available for new businesses”.

Despite the outlay for lending for agriculture and

priority sectors, many farmers find it difficult to

receive loans as they do not fulfil even the basic

threshold of risk for the banks to be able to extend

loans.

The Tobacco Board provides IT-enabled auction

platforms which route the transactions on the floor

through the board. The board, in turn, gives a

passbook to the farmer as a record of the dealings

with the amounts due, quantities sold, etc. This

passbook provides collateral for the banks, who

lend on that security to the tobacco farmers. Any

process of substitution of tobacco needs to provide

the affected persons the same bouquet of

advantages as they enjoyed prior to the shift and

any process that does not provide all the

advantages they had would make them

disadvantaged.

22

CHAPTER III

TOBACCO AND INDIA’S RURAL ECONOMYA study of comparative social, economic and development indicators between predominant

tobacco and partial tobacco growing districts

CHAPTER IV

Relationship between economic growth and

human development

The Human Development Report (HDR) of the UNDP

titled “Economic Growth and Human Development”

in 1996 made the first correlation between

economic growth and human development. The

theme centred on the premise that economic

growth is the means but human development is the

end.

The report goes on to state:

“There need be no conflict between growth and

equity”.

The traditional view that economic growth in the

early stages is inevitably associated with

deteriorating income distribution has been proved

false. The new insight is that an equitable

distribution of public and private resources can

enhance the prospects for further growth. The

assertion that the benefits of growth in the early

stages would inevitably be skewed towards the rich

rested on two principal arguments. The first came

from Nobel laureate Simon Kuznets, who said that

inequality would first rise, as workers left

agriculture for industry, and then fall as industrial

production became more widespread.

The second was advanced by Nicholas Kaldor, who

emp hasized the importance of savings. He

argued that the only way to

finance growth would be by

channelling the initial

benefits into the pockets

of rich capitalists. Since

they have a higher

propensity to save,

only they could provide

the funds for

investment. These

hypotheses have been

disproved by recent

evidence of a positive

correlation between economic

growth and income equality (as represented by the

share of the poorest 60% of the population).

Well-developed human capabilities and well-

distributed opportunities can ensure that growth is

not lopsided and that its benefits are equitably

shared. They can also help in getting the most

growth”.

Subsequent studies by Ranis of Economic Growth

Centre of the University of Yale, USA titled “Human

Development and Economic Growth” in 2005 says

“Income growth clearly strikes one as the main

contributor to directly increasing the capabilities of

individuals and consequently the human

development of a nation since it encapsulates the

economy’s command over resources (Sen, 2000)….

However, GDP also has a strong effect on literacy

and health outcomes, both through private

expenditures and Government programs. Thus,

insofar as higher incomes facilitate the

achievement of other crucial human development

objectives, it also has an indirect effect on human ”development .

A number of other respected research studies till

date indicate that economic growth and human

development move together and are mutually

reinforcing in the long-run. However, economic

growth does not invariably and independently

translate into human development. A Princeton

University Report on HDR says that “Countries differ

in their human development efficiency, or in how

well they translate income into human

development. Links between human development

and economic growth can be mutually reinforcing.

When links are strong, they contribute to each

other”.

We have studied the linkages between economic

growth and human development based on

academic and applied research and attempted to

correlate the relationship between economic growth

and human development indices in comparable

districts that are in close proximity and under the

same political administration for districts which

predominantly grow tobacco and those which grow

alternative cash crops.

Higher incomes facilitate

the achievement of other crucial human

development objectives, it also has an indirect

effect on human development

23

The purpose of this study is to understand the

economic and social capabilities that either group

of farmers has achieved by plying their trade. Any

change brought about by regulation or Government

mandate which restricts their ability to pursue their

free trade needs to consider their economic and

social capabilities and recommend alternative

livelihoods based on such factors.

Basis for selection of indicators

Economic indicators

The most popular measure of income is the Gross

Domestic Product (GDP), which adds up the values

of everything produced in the country in a year.

However, GDP which is a measure of economic

growth does not consider social and other

development measures in its construct and hence

does not relate to equitable growth. A study led by

Cambridge economist, Partha Dasgupta, proposes a

new "Inclusive Wealth Index" (IWI) that attempts to 31make up for these gaps . It measures four kinds of

capital or assets in 20 countries – human,

manufactured, natural and health. In order to

capture the wealth indicators as considered by IWI,

we have considered assets like ownership of

houses, owning other assets like television sets, two

wheelers, cars, mobile phones, etc., as indicators of

wealth to enable us carry out a comprehensive

analysis of the wealth in districts and their link to

economic development. We have used all data

made available in public domain by Census of India.

The other important indicator is the NSS Consumer

Expenditure Survey which aims at generating

estimates of household Monthly Per Capita

Expenditure (MPCE) and its distribution separately

for the rural and urban sectors of the country, for

states and union territories, and for different

socioeconomic groups. These indicators are

amongst the most important measures of the level

of living of the respective domains of the population

and are crucial inputs for estimation of prevalence

of poverty by the Planning Commission in India.

We have also analysed the district domestic product

and per capita income given by the statistical

departments of the states for our report in order to

have an equitable and independent basis for our

analysis.

Development and social indicators

No other indicator of development has attracted as

much public attention in recent years as the Human

Development Index (HDI). The approach to this

index gained momentum with the release of the

annual Human Development Reports (HDR) by the

UNDP in the 1990s. UNDP, through its global HDRs,

identifies the choice to lead a long and healthy life;

to acquire knowledge and be educated and to have

access to resources needed for a decent level of

living as the most critical and socially valuable

indicators for measuring HDI. Thus, HDI is regarded

as a measure of human welfare, while the GDP

approach is unable to fully consider all aspects of 32human development .

Human development indicators normally rely on

economic attainment or command over resources,

longevity and education. The aspect of basic

amenities provides an additional crucial dimension

to the issues related to human development. Thus,

this is taken as the fourth important indicator for

estimating the HDI in several studies.

In India, planners are sometimes criticised for

focusing too much on GDP growth, when the real

objective of planning is to achieve an improved

quality of life for people across economic and non-

economic dimensions. The Twelfth Plan fully

recognises that the objective of development is

broad-based improvement in the economic and

social conditions of our people. However, rapid

growth of GDP is an essential requirement for

achieving this objective. The Twelfth Plan lays

special emphasis on the development of social

sectors in view of their impact on human 33development and quality of life .

Keeping in mind both the Human Development

Index of the UN and quality of life pointers by the

Planning Commission, we have selected the key

development and social indicators based on the

UNDP’s Millennium Development Goals, 2005, of

which India is a signatory, and its quality of life

pointers. The key goals that were selected for this

study are:

• Poverty eradication

• Universal education

• Reduction of child mortality

• Improved maternal health

• Access to clean water and sanitation

31 UNU-IHDP and UNEP (2012). Inclusive Wealth Report 2012. Measuring progress toward sustainability. Cambridge: Cambridge University Press.

32 Bedi & Ramachandran, Human Development Index for Andhra Pradesh, NCEAR working paper,99, 2008

33 Twelfth Five Year Plan

24

CHAPTER IV

Basis of selection of the states

The majority of the states in the Indian Union grow

some type of tobacco, significantly influencing the

economy and prosperity of the farming community.

Andhra Pradesh, Karnataka, Gujarat, Maharashtra,

Bihar and Tamil Nadu are major tobacco producing 34states contributing over 90% of its production . Our

study covers three states Andhra Pradesh, Gujarat

and Karnataka which together account for 85% of

the country’s tobacco growing areas.

The economic advantages of producing tobacco are

many, which make its production viable. According

to the Central Tobacco Research Institute (CTRI),

tobacco, unlike other crops, is a high value

commercial crop and has, over the years, gained

high productivity levels owing to sustained research

and developmental efforts. Tobacco has emerged

as an economically viable crop in regions which

otherwise are not suitable for cultivating other

significant cash crops.

The current chapter analyses the situation in

Andhra Pradesh and Karnataka making a

comparison between predominantly tobacco

growing districts with that of non-tobacco growing

districts, based on certain parameters of

developmental and socioeconomic relevance.

The key objective is to explore whether comparable

districts that predominantly grow tobacco show

better economic, social and development indicators

than those which do not.

Research methodology

A mixed-methods design including qualitative

method [in-depth interview and Focus Group

Discussion (FGD)] and quantitative data collection

from Government sources formed the basis of the

study design and architecture. The mixed-methods

design allowed researchers to develop a more

comprehensive understanding of the complexity of

human behaviours and experiences. Incorporation

of the qualitative method in the present study

added a socioeconomic dimension to the impact of

tobacco farming on the livelihood and overall

development of farmers.

The main information on the districts covered in our

study was collected from major government data

sources like National Sample Survey Office (NSSO),

Ministry of Agriculture, Census, the state planning

departments, as well as from the respective

industry associations. In order to have a broader

analysis, we took into account the general

socioeconomic characteristics like household

assets and income levels along with quality of life

indicators as identified by the Planning

Commission.

As part of our study, a number of FGD and one-on-

one interviews were held in two major tobacco

producing districts of Andhra Pradesh and

Karnataka in the months of April and May, 2013.

Meetings at the auction platform of the Tobacco

Board located in Koyalagudem were also

conducted. In Andhra Pradesh we had FGD in

Devarapalle and Gopalapuram mandal which is in

West Godavari district as well as Tangutur mandal

of Prakasam district. During the FGD, we asked

certain set of questions on a vast range of issues

from all the participants like farmers, traders,

processors, exporters and on the basis of the

recommendation we have selected the districts.

Virginia Tobacco Growers Association represented

by Shri Achanta Gopal Krishna, Shri Karatam

Venkata Reddi Naidu of Virginia Tobacco Farmers

association, Shri Suryaprakash Rao have suggested

Khammam and Warangal district for comparative

analysis of non-tobacco producing district with

tobacco producing district.

In Karnataka, Shri Vikram Raj Urs of Federation of

Karnataka Virginia Tobacco Growers Association

and Shri Vishwanath RV of Karnataka Tobacco

Growers Forum in Periyapatna suggested

Chamarajnagar and Chitradurga as non-tobacco

districts.

The qualitative data was collected from the major

stakeholders of the tobacco industry through FGD

and one-on-one meetings carried out using a

standard questionnaire with both structured and

non-structured questions relevant to the study. The

questionnaires were developed and tested during a

pilot survey. These ranged from their cultivation

characteristics to their lifestyles to their experiences

with the trading mechanism, etc. The tobacco and

non-tobacco districts will be analysed on various

indicators like household assets, health, literacy,

infrastructure, GDP, per capita income, MPCE and

other development parameters.

We have attempted to identify all major factors

responsible for the cultivation of tobacco vis-à-vis

other major crops through academic and applied

research conducted by various authorities,

discussions and interviews with various

stakeholders.

34 CTRI, Vision 2050, Rajahmundhry

25

CHAPTER IV

This section is based on data collected from the two

districts in the coastal region, i.e., West Godavari

and Prakasam, and two from the interior,

Khammam and Warangal from Telangana region.

While West Godavari and Prakasam are the two

major tobacco growing districts in Andhra Pradesh,

the districts of Khammam and Warangal are not

predominantly tobacco producing but have a good

agricultural portfolio for other crops like groundnut

and chillies.

Rationale for selection of districts

The selection of the districts was based on certain

criteria which made them compatible to our study

and these are:

• Annual rainfall and irrigation

• Agro climatic zone

• Net cropped area

• Predominant type of soil

• Area under tobacco

• Quantity of tobacco produced and other cash

crops

• Money generated at farm harvest prices of

select crops

• Gross value added of agriculture sector at

current prices

• No. of agricultural labourers

A comparative study of development, social and economic indicators of West Godavari and Prakasam

(tobacco growing districts) with those of Khammam and Warangal (non-tobacco growing districts)

CASE STUDY 1: ANDHRA PRADESH

Map shown here is only for illustrative purpose.

Source: Census of India 2011

26

CHAPTER IV

The crops : A discussion

27

35 http://www.crida.in/Pubs/Contingency%20crop%20bk_27-7-2012%20Full%20Book%20Proof%2028-7-2012-High.pdf

36 Directorate of Economics and Statistics, Ministry of Agriculture

37 Study by Annigeri V.B., Control of Tobacco Cultivation, CMDR, Dharwad

The patterns of rainfall in our selected districts, namely, West Godavari, Prakasam, Khammam and Warangal are quite similar. Rainfall and irrigation systems are crucial to improving the agricultural yield, irrespective of the nature and variety of the crop. These districts have very limited rainfall and irrigation facilities and have similar soil conditions and agro climatic zones, which make them comparable agro climatic zones.

According to Census 2011 data, agricultural labour force comprises a sizeable share in the population in the districts of Prakasam and West Godavari, figuring at 8,88,815 and 7,21,512, respectively. In 2012, based on the data of Ministry of Agriculture, the production went down by 8% in Andhra Pradesh and by about 15% in Karnataka.

Census 2011 states that Khammam and Warangal have a sizeable agriculture portfolio which includes dry chillies and groundnut. Khammam produced 1,03,018 tonnes of chillies and 12,051 tonnes of groundnuts while Warangal produced 65,405 tonnes of chillies and 51,743 tonnes of groundnuts.

Agriculture in Peninsular India is predominantly rain fed. Around 57% area in Andhra Pradesh and 70% in

35Karnataka has a significant dependence on monsoon. This is one of the criteria on which we based our selection of districts. Deficit rainfall due to delayed onset or breaks in the southwest monsoon is a major limiting factor for crop production in Peninsular India, especially in Andhra Pradesh & Karnataka. Based on the parameters stated above, Prakasam and West Godavari districts were selected as they are coastal regions. These two coastal districts constitute the bulk of tobacco production in Andhra Pradesh. While the production in West Godavari district is 52,357 tonnes, Prakasam accounts for 1,27,518 tonnes, with the highest concentration of tobacco cultivation in terms of area

36devoted to tobacco cultivation, i.e., 1,09,439 hectares alone in these two districts.

The study has considered groundnut and chillies as comparative crops to tobacco based on the above factors. These crops are also regarded as

37alternative crops to tobacco by CTRI , CMDR, Dharwad, and other bodies and hence provide a proxy to growing tobacco.

As highlighted in the illustrations below, the districts of Warangal and Khammam produce the bulk of groundnut in Andhra Pradesh and now come under Telangana region. Similarly, Khammam is the leading producer of chillies in our selected comparable districts.

Tobacco production Chilles production

27% 66% 6% 1% 27% 43%2% 28%

Groundnut production

West Godavari Prakasam Khammam Warangal

17% 13%13% 57%

West Godavari Prakasam Khammam WarangalWest Godavari Prakasam Khammam Warangal

On an average,

tobacco growing

districts spend a

relatively higher

amount of income

which is demonstrated in

the assets created

CHAPTER IV

Based on the parameters, a comparative analysis between the four districts of West Godavari, Prakasam, Warangal and Khammam is as under:

Notes :

1. Value of money is calculated by multiplying the farm harvest prices given by Directorate of Economics and Statistics, Ministry of Agriculture.

2. Agro climatic zones are taken from Central Research Institute for Dryland Agriculture, Hyderabad.

Indicators at 2011 West Godavari Prakasam Khammam Warangal

Mean annual rainfall (in mm) 1,102 812 1,096 991

Agro climatic zone AP-2 AP-3 AP-6 AP-6

Type of soil Red sandy Black and red Black and red Black and red

Gross value added of 11,76,954 7,68,219 4,94,212 5,77,553agriculture sector at current prices (Rupees in lakhs)

Number of agricultural labour 7,21,512 8,88,815 6,67,342 5,76,649

Net cropped area 3,96,000 5,48,100 3,96,970 4,34,000

Area under tobacco (in hectares) 28,168 81,271 4,488 650

Tobacco production (in tonnes) 52,357 1,27,518 11,338 978

Value of money generated by 550.00 1248.00 46.72 4.03tobacco using farm harvest prices (Rupees in crores)

Chillies production (in tonnes) 4,560 64,404 1,03,018 65,405

Value of money generated by 21.67 273.63 470.89 298.90chillies using farm harvest prices (Rupees in crores)

Groundnut production (in tonnes) 11,953 14,875 12,051 51,743

Value of money generated by 28.30 37.92 30.31 99.97groundnut using farm harvest prices (Rupees in crores)

Value of money of all three 599.97 1,559.55 547.92 402.9crops (Rupees in crores)

Sources: District Handbook of Statistics, http://apy.dacnet.nic.in/crop_fryr_toyr.aspx, Department of Agriculture, Central Research Institute for Dryland Agriculture and Census 2011

28

CHAPTER IV

th Source: Socioeconomic Survey by Planning Department, Andhra Pradesh, NSS 66 Round

The income of the tobacco growing and non-tobacco growing regions opens up a broader perspective and understanding for our study. In this aspect, West Godavari district’s agriculture sector added `11,76,954 lakhs to the district GDP.

thThe monthly per capita expenditure (MPCE) NSS 66 Round provides rather different figures in which Prakasam scores over the other district with `1,475. Maximum expenditure was incurred on food items for the two categories of households as compared to other items. On an average, tobacco growing districts spend a relatively higher amount of income which is demonstrated in the assets created. The per capita income is almost similar in both tobacco growing districts and is in the range of `60,161. Khammam’s per capita income is the highest in the districts studied, and Warangal’s is the lowest at `47,947.

Economic indicatorsWealth and income indicators – Rural households

The wealth indicators in rural households in the selected districts show a propensity for consumption and asset creation amongst those who predominantly grow tobacco compared to those who grow groundnuts and chillies. This is manifested by a larger number of houses, houses in better condition, etc., than in the corresponding districts that do not grow tobacco. The other manifestation of prosperity comes in the form of ownership of assets like mobile phones, cars, two wheelers and television sets, which are indicators of economic well-being.

Income indicators

West Godavari Prakasam Khammam Warangal

Gross value added of agriculture 11,76,954 7,68,219 4,94,212 5,77,553sector at current prices (Rupees in lakhs)

District GDP at current price 26,906 21,801 18,884 19,642(Rupees in crores) 2010-11

thMPCE (NSS 66 round) 1,373 1,475 1,207 1,446

Per capita income at factor cost 60,128 60,161 61,200 47,947(current prices in Rupees) 10-11

West Godavari Prakasam Khammam Warangal

Number of households 7,32,741 6,20,378 5,22,485 6,12,145having own houses

Good condition houses 5,67,307 4,57,301 3,52,646 3,44,113

Houses having four rooms 40,237 9,378 26,826 37,734

Households having television sets 4,98,552 3,43,077 2,92,152 2,83,367

Households having two-wheelers 1,27,093 70,280 64,177 60,408

Households having car/jeep 7,986 5,282 5,125 5,683and vans

Households having mobile phones 3,65,603 3,44,125 2,73,207 3,38,109

Wealth indicators

29

Source – Census 2011, Office of the Registrar General of India, Ministry of Home Affairs

CHAPTER IV

Social and development indicators

Health indicators

In terms of health indicators, West Godavari and Warangal are quite close when it comes to infant mortality which is a very important indicator globally to ascertain human development. Child immunisation is the worst in Warangal which is just 72% despite having a good percentage in institutional delivery.

West Godavari Prakasam Khammam Warangal

Infant mortality ratio 4.68 10.53 9.59 4.7

Maternal mortality ratio 39 56.57 30.55 26.56

Institutional delivery 81.5 76 92 84.3

Child immunisation 86 88 92 72

Source – National Health System Resource Centre, HMIS data 2011, Ministry of Health and Family Welfare

Literacy is considered to be an important component

of human infrastructure which is a key to overall

human development. It is found that West Godavari

has the privilege of having a higher number of

literates among the districts, at 74.32%. The other

three have a recorded lower literacy rate than West

Godavari district but they are in close competition

with each other with a difference of just 2% as

mentioned in the chart.

West Godavari also leads in indicators like pass

percentage and drop-outs whereas enrolment is more

in Warangal but followed closely again by West

Godavari district. The education scenario in districts

also reflects the level of awareness. Here it means that

the farmers can learn to increase their productivity by

using new techniques and market their produce

efficiently. Thus, ultimately literacy will bring in a better

social and economic status for the people.

Education indicators

West Godavari Prakasam Khammam Warangal

Literacy rates 74.32 63.53 65.46 66.16

School enrolment 5,47,847 4,56,348 4,56,344 6,32,666

Drop-outs 24.21 46.03 26.62 43.1

Pass percentage 86.03 71.44 72.1 73.59

Source – Sarva Shiksha Abhiyan, Andhra Pradesh

Financial inclusion

West Godavari and Prakasam have a fair amount of financial inclusion, a measure of economic and social development, as compared to other non-tobacco growing districts. Financial inclusion leads to better living standards and makes farmers relatively financially independent. In our FGD, we found that many farmers have sent their children abroad for higher studies and they attribute this to banks who have provided them with loans.

West Godavari Prakasam Khammam Warangal

Number of banks 378 Not Available 246 249

Number of people 4,68,728 4,97,558 3,40,102 4,28,950availing loan facility

Source – Handbook of Statistics and Census 2011

30

CHAPTER IV

The basic civic facilities are considered as the

determining factor for development of a region. The

infrastructure may be physical and human. Here we

have examined the availability of physical

infrastructure of households in selected districts.

West Godavari district has emerged as having the

most advanced infrastructure in homes in regard to

water within premises, electricity, sanitation and

usage of LPG, whereas Prakasam lags behind in

water within premises as there is little water source

or irrigation facilities in that district. The rainfall is

also quite deficient in that particular district.

In terms of sanitation facilities, West Godavari is

way ahead of the three districts as there are

6,94,857 households that have these facilities

while districts like Khammam have just 3,60,531

households with these facilities.

Conclusion

The overall economic and income indicators in the

predominantly tobacco growing districts compare

favourably with comparable and adjacent districts

that grow alternative crops. Hence, tobacco does

create an earning and other social capability to

those who are engaged in agriculture. The human

development indicators are comparable on an

overall basis and this is due to the efforts of both

government and private enterprise.

Tobacco cultivation is critical for the rural economy

of these districts and has remained buoyant during

the recent worldwide economic crisis. The

immediate economic impact of decline in the

tobacco industry in these districts would be

substantial unless viable crops are identified. In

these regions, farms tend to be small, production

costs are high, relatively few alternatives are

available for tobacco and hence solutions would be

complex.

Water and sanitation indicators

West Godavari Prakasam Khammam Warangal

Access to water within premises 5,93,261 1,97,300 3,54,579 3,03,716

Availability of electricity 10,17,568 7,63,746 6,68,519 8,28,077

Households having 4,35,334 2,90,947 2,19,710 2,37,349LPG for cooking

Sanitation facilities 6,94,857 3,12,332 3,60,531 3,88,583

Source: Census 2011, Registrar General and Census Commissioner India, Ministry of Home Affairs

31

CHAPTER IV

CASE STUDY 2: KARNATAKA

A comparative study of development and social and economic indicators for Mysore and Hassan (tobacco growing districts) with those for Chamarajnagar and Chitradurga (non-tobacco growing districts)

Rationale for selection of districts

The selection of the districts was done with a view to capture the socioeconomic dimensions in areas based on certain criteria. Enumerated are the various parameters which were considered for the selection of the districts:

• Annual rainfall and irrigation

• Agro zones

• Net cropped area

• Area under tobacco and other major crops

• Quantity of tobacco produced and majorcash crops

• Value of money supply

• Number of agricultural labourers

Map shown here is only for illustrative purpose.

Source: Census of India 2011

32

CHAPTER IV

38 Directorate of Economics and Statistics, Ministry of Agriculture

39 Lack of rainfall worries tobacco growers, The Hindu, June 30th, 2012

38 Directorate of Economics and Statistics, Ministry of Agriculture

39 Lack of rainfall worries tobacco growers, The Hindu, June 30th, 2012

The crops : A discussion

33

Based on the parameters of our methodology,

Mysore and Hassan districts were selected. These

districts together constitute about 75% of tobacco

production in Karnataka. While the production in

Mysore district is 58,700 tonnes, Hassan accounts

for 10,806 tonnes, with the highest concentration

of tobacco cultivation in terms of area devoted to 38 tobacco cultivation, i.e., 95,100 hectares which is

Tobacco production

Mysore Hassan Chamarajnagar Chitradurga

84% 15% 0% 1%

around 80% in these two districts.

We have considered the other major cash crop,

groundnut, for this study as an alternative. As

highlighted in the illustration below, the districts of

Chamarajnagar and Chitradurga produce sizeable

amounts of groundnut in Karnataka.

According to Census 2011 data, agricultural labour force comprises a sizeable part of the population in the districts of Mysore and Hassan at 2,01,684 and 1,07,427 respectively. Karnataka has a little over 42,000

39registered growers and around 57,000 barns . Most of them are located in Mysore and Hassan and together share the maximum production among them.

Groundnut production

1% 12%5% 82%

Mysore Hassan Chamarajnagar Chitradurga

CHAPTER IV

Economic indicators Wealth and income indicators – Rural households

Wealth indicators

Source: Census 2011

Number of households having own houses

Good condition houses 1,87,869 1,53,365 92,709 1,38,443

Houses having four rooms 10,705 16,215 3822 8202

Households having television sets 2,00,154 1,97,633 85,156 1,20,208

Households having two-wheelers 71,858 62,981 25,879 36,092

Households having car/jeep 5,665 7,962 1,742 3,834and vans

Households having mobile 2,09,178 1,74,931 83,962 1,24,302phones

Mysore Hassan Chamarajnagar Chitradurga

3,77,488 3,16,912 1,92,068 2,58,685

Based on the parameters, a comparative analysis between the four districts of Mysore, Hassan, Chamarajnagar and Chitradurga is as under:

Mysore Hassan Chamarajnagar Chitradurga

Mean annual rainfall (in mm) 1,029 1,284.6 867 886.6

Agro zone KA-7 KA-7 KA-6 KA-4

Type of soil Red & black Deep red Red sandy Red & black & black

No. of agricultural labourers 2,08,164 1,07,427 1,54,300 1,92,769

Net cropped area(in hectares) 3,37,967 3,54,592 1,88,867 4,33,392

Area under tobacco 83,050 12,050 154 457(in hectares) 2010-11

Tobacco production (in tonnes) 58,700 10,806 119 352

Value of money generated by 651.51 120.11 1.32 3.90tobacco using farm harvest prices

Groundnut production (in tonnes) 4,343 684 9,355 66,607

Value of money generated by 10.72 1.70 23.09 164.49groundnut using farm harvest prices

Notes :

1. Value of money is calculated by multiplying the farm harvest prices given by Directorate of Economics and Statistics, Ministry of Agriculture.

2. Agro climatic zones are taken from Central Research Institute for Dryland Agriculture, Hyderabad.

Sources: District Handbook of Statistics, http://apy.dacnet.nic.in/crop_fryr_toyr.aspx, Department of Agriculture, Central Research Institute for Dryland Agriculture and Census 2011

34

CHAPTER IV

Income indicators

Mysore Hassan Chamarajnagar Chitradurga

District GDP at current prices (Rupees in crores) 08-09

th MPCE (NSS 66 round) 1398 1004 1029 836

Per capita income at factor cost 37,184 29,891 26,161 30,169(current prices in Rupees) 08-09

11,974 6276 3040.9 5654

Per capita income, MPCE, district GDP are indicators of

standard of living of a particular region. However, data on

gross value added of agriculture for each district is not

available in the public domain for Karnataka. Mysore’s per

capita income stood at `37,184 which is the highest among

all the selected districts. Mysore and Hassan also lead in

MPCE and district GDP. Since Mysore and Hassan have

about 80% of their area under tobacco crop, the contribution

of tobacco in the district GDP is significant.

th Source: Economic Survey of Karnataka, 2011, and NSS 66 Round

Tobacco cultivation is

critical for the rural economy

and has remained buoyant

and sustained during the recent

worldwide economic crisis.

The wealth indicators for Mysore and Hassan which are primarily tobacco growing districts are significantly superior compared to the non-tobacco producing districts. Mysore leads in all wealth indicators while Chamarajnagar district has lowest number of households having own houses and this trend continues in other indicators as well.

35

Financial inclusion

Mysore and Hassan have a larger population included by banking services and the larger number of banks also indicates that there is a larger amount of money supply to absorb such services. However, in Chamarajnagar only 84,983 are availing banking services with 156 banks and in Chitradurga 1,90,436 persons are availing banking services with 141 banks. This indicates relative economic disparity between the districts.

Mysore Hassan Chamarajnagar Chitradurga

Number of banks 330 225 156 141

No of people availing 3,41,785 3,18,373 84,983 1,90,436banking services

Source – District Statistics at a Glance, 2011, and Census 2011

CHAPTER IV

Water and sanitation indicators

Mysore Hassan Chamarajnagar Chitradurga

Access to water within premises 4,09,885 1,47,920 77,087 86,859

Availability of electricity 6,40,868 4,00,702 2,12,156 3,07,257

Households having LPG 2,73,706 90,599 40,944 60,522for cooking

Sanitation facilities 3,78,503 1,71,212 57,295 1,07,142

Source: Census 2011

Education indicators

Mysore Hassan Chamarajnagar Chitradurga

Literacy rates 72.56 75.89 61.12 73.82

Female literacy 66.59 68.3 54.32 66.05

School enrolment 4,62,278 2,55,276 1,41,082 2,71,105

Drop-outs 5.62 7.46 7.92 3.46

Source: District Wise Annual Report, Department of Education, Karnataka, 2010

Hassan district has the highest levels of literacy among the selected districts and it is followed closely by

Chitradurga and Mysore. Chamarajnagar is far behind in literacy rates at 61%. In terms of female literacy,

Mysore and Chitradurga are fairly close. School enrolment is highest in Mysore and lowest in Chamarajnagar.

Chitradurga has the lowest rate of drop-outs, i.e., 3.46, among the selected districts whereas Chamarajnagar

has the highest at 7.92.

Social indicators

Mysore Hassan Chamarajnagar Chitradurga

Infant mortality ratio 0.96 4.32 10.58 3.29

Maternal mortality ratio 157.98 76.73 97.52 150.86

Institutional delivery 80.4 80.1 76.5 63.9

Child immunisation 177 119 109 97

Source: National Health System Resource Centre, HMIS data, MoHFW

Health indicators

Infant mortality rate is estimated at 0.96 in Mysore as compared to 10.58 in Chamarajnagar. As we have discussed earlier, infant mortality rate is one of the most important indicators for health and it is quite evident in the case of Mysore. Maternal mortality ratio of Mysore is quite close to Chitradurga whereas it is lowest in Hassan district with 76.73%. Child immunisation is also remarkable in Mysore which is 177% as compared to 97% in Chitradurga. Institutional delivery is almost similar in Mysore and Hassan at 80% and it is lowest in Chitradurga.

36

CHAPTER IV

Conclusion

Mysore and Hassan districts have superior economic and social development indicators compared to the

comparable districts of Chamrajnagar and Chitradurga, which grow alternative crops. The other indictors like

per capita income, MPCE, Gross District Domestic Product (GDDP), socioeconomic infrastructure, etc., are also

better in Mysore and Hassan.

Tobacco cultivation is critical for the rural economy in these districts and is one of the reasons for agricultural

activities to have remained buoyant and sustained during the recent worldwide economic crisis. The likely

immediate economic impact of decline in the tobacco industry in these districts would be substantial. In these

regions, farms tend to be small, production costs are high, and relatively few alternatives are available to

tobacco.

Drastic and immediate reduction of the tobacco growing from the districts like Mysore and Hassan may lead to

dramatic changes in the structure of overall farming, employment, income and socioeconomic balance of the

districts and hence alternatives need to be designed keeping in mind their capabilities of providing similar

economic and social standards to those achieved by these people due to their efforts.

37

Mysore and Hassan districts have better access to water and sanitation facilities along with higher coverage of

electricity and LPG connections. Chamarajnagar and Chitradurga districts lag in terms of such infrastructure

facilities. The basic amenities as above are expected to contribute to a decent standard of living in these

districts and Mysore and Hassan have the best comparable indicators.

CHAPTER IV

40 http://aau.in/college-menu/

A comparative study of development, social and economic indicators of Anand and Kheda (tobacco growing

districts ) with Patan and Panchmahal (non – tobacco growing districts).

In Gujarat, tobacco is cultivated in around 65,000 - 85,000 ha, the major type being bidi tobacco. The other

types of tobacco grown in Gujarat are chewing (lal and kala chopadia), hookah (gadaku) and rustica, which are

grown in about 20,000 ha. Total production comes to about 125 million kg with a productivity of 1800 kg/ha.

The production of bidi tobacco in Gujarat is largely concentrated in Middle Gujarat Zone comprising Kheda,

Anand and Vadodara districts (90% of total production of Gujarat) besides a small area in Panchmahal and

Dohad districts, while in North Gujarat Zone in Ahmedabad district in a compact area of about 500 ha of

Sanand taluka, gadaku tobacco is grown. In Mehsana, Banaskantha, Gandhinagar and Sabarkantha districts 40mainly rustica tobacco is cultivated .

Source: Ministry of Agriculture, Government of India

Tobacco production

69% 30% 1% 0%

Anand Kheda Patan Panchmahal

Mustard production

6% 0%5% 89%

The case study for Gujarat has

several limitations due to the age

and quality of data available in

public domain, which influences the

choice of districts. For this purpose,

we have covered Anand and Kheda

districts of Gujarat which are major

tobacco producing areas. They

produce mainly bidi tobacco which

is largely consumed by economically

weaker section. The non-tobacco

districts are Patan and Panchmahal

which have sizeable agricultural

portfolio crops like maize, mustard,

paddy and cotton.

CASE STUDY 3: GUJARAT

The crops : A discussion

Anand Kheda Patan Panchmahal

Map shown here is only for illustrative purpose.

Source: Census of India 2011

38

CHAPTER IV

Economic indicators

Anand and Kheda have significantly superior economic and wealth indicators than comparable districts. However, such indicators may not be totally attributable to tobacco as there are other factors including industry, dairy farming, etc., that contribute to such wealth.

Source: Census 2011

Number of households having own houses

Good condition houses 2,62,549 2,74,395 1,66,872 2,28,470

Houses having four rooms 82,255 91,237 45,538 73,123

Households with TV, computer/ 20,391 12,080 5,271 7,024laptop, telephone/mobile phone and scooter/car

Anand Kheda Patan Panchmahal

3,79,759 4,29,236 2,45,138 4,25,072

Based on the parameters, a comparative analysis between the four districts of Anand, Kheda, Patan and Panchmahal is as under:

Anand Kheda Patan Panchmahal

Mean annual rainfall (in mm) 831 779 730 752

Type of soil Clay & sandy Loamy sand Medium black Sandy loamloam & loamy sand

Agro zone GJ-8 GJ-3 & 4 GJ-5 GJ-3

No. of agricultural labourers 2,63,622 2,39,743 1,58,550 1,31,350

Net sown area (in hectares) 2,21,900 2,97,240 3,83,300 2,36,800

Area under tobacco (in hectares) 77,300 37,600 600 600

Production of tobacco (in tonnes) 1,54,200 67,500 1,200 1,000

Production of groundnut (in tonnes) 1,200 1,700 Not available 6,400

Production of mustard (in tonnes) 3,400 2,900 55,300 300

Source: CRIDA, Hyderabad, Census 2011 and Ministry of Agriculture

Social indicators

Health indicators

Infant mortality ratio, a major component of health statistics, is 12.43 in Kheda and in Patan it stands at 38.49. Maternal mortality ratio is similar in Anand and Kheda at 94%. In immunisation for children, Anand has the best coverage and Panchmahal has the lowest.

Anand Kheda Patan Panchmahal

Infant mortality ratio 23.23 12.43 38.49 27.7

Maternal mortality ratio 94 94 93 104

Institutional delivery 87.91 56.92 71.34 83.04

Child immunisation 78.4 69 61 52.4

Source: National Health System Resource Centre, HMIS data, MoHFW

39

CHAPTER IV

Conclusion

The indicators to ascertain the level of economic, social and human

development in selected districts of Gujarat shows that tobacco growing

districts have higher levels of infrastructure, health and education.

More importantly, the agriculture sector in Gujarat is market oriented

and over a period of time, farmers have modified their growing

patterns to take advantage of market demand and dynamics.

However, Gujarat being significantly industrialised, economic or social

indicators may not be attributable to agriculture and mainly tobacco.

The performance of the agriculture sector has been fluctuating at

times with fluctuation in rainfall. This has had an impact on the

agriculture sector and thereby on the economy as a whole, since its

contribution towards total Gross State Domestic Product (GSDP) has remained

at around 14%.

Tobacco in Gujarat remains a significant cash crop which is freely grown and the growers have analysed risks

and rewards of the alternatives available and their shift to tobacco is a conscious one. Hence, alternative

solutions to tobacco need to consider the opportunities and related economic gains such growers will forego

due to the shift.The production of important crops in the state is shown in the table below:

Production of important crop groups (In 000 mt.)

Sr. No. Item 2008-09 2009-10 % change

1 Food grains 6,345 5,605 -11.7

2 Groundnut 2,661 1,757 -34

3 Oilseed 3,932 3,010 -23.4

4 Cotton 7,014 7,401 5.5

5 Tobacco 70 102 45.7

The table indicates that the production levels of food grains, groundnut and oil seeds crop groups during 2009-

10 have remained substantially lower than that of the year 2008-09 except that of tobacco which has

increased substantially to almost 50%.

Given this, the Gujarat farmers have adopted a market-oriented approach and shifted to crops which give good

returns. In this scenario, tobacco gives them a good opportunity to earn their livelihood.

Alternative shift to

tobacco need to consider

the opportunities and

related economic gains

such growers will forego

due to the shift.

Water and sanitation indicators

Anand and Kheda have more access to basic amenities than the other selected districts. This may be a causality which may not be caused by agriculture.

Anand Kheda Patan Panchmahal

Access to water within premises 2,83,725 2,33,592 1,82,619 1,29,165

Availability of electricity 3,78,310 3,72,226 2,23,424 3,98,937

Household having LPG for cooking 1,47,122 99,982 66,310 59,096

Sanitation facilities 2,30,571 1,72,599 1,23,977 1,21,676

Source: Census 2011

40

CHAPTER IV

The quest for defining and providing a sustainable

alternative livelihood needs to take into account the

socioeconomic capabilities of tobacco farmers. This

right and entitlement of such farmers for an equitable

and viable socioeconomic alternative is embedded in

the Constitution of India which equates this to their

right to life. A report by Dr. VM Prasad of the

Ministry of Health (2007) acknowledges that tobacco

has a profound effect on the economic prosperity

in the regions where it is grown. We have found

that tobacco growing regions in India have

better economic and development indicators than

comparable regions growing recommended

substitute crops. The solutions to alternative

livelihoods of tobacco farmers need to be holistic,

inclusive and responsive to the needs of the farmers

displaced from exercising their livelihood.

CTRI, Rajahmundhry, has been carrying out

research in five agro climatic regions on possible

viable alternatives to tobacco and has advised the

Health Ministry of the Government of India to form a

response on this matter in the Seoul Round in

November 2012. The alternatives suggested by

CTRI to the tobacco farmers have been crops grown

in these regions for years. The farmers have been

aware of such crops and have explored the viability

of such a proposed mix of alternative crops even

before the call was made to reduce production of

tobacco. They have taken a considered and rational

decision to grow tobacco as compared to any other

crop. They have experimented in the past with the

current suggestions of adding dairy farming or

poultry in their product portfolio and have definitive

views of their viability and associated risks.

Therefore, the solutions suggested by the

Government bodies are neither innovative nor viable

according to the farmers and hence are resisted by

them. These farmers, of their own free choice and

with active assistance of the Government, had earlier

transitioned from subsistence agriculture and

cultivation of Bengal gram, Ragi etc., to a more viable

alternative livelihood through tobacco and they

believe that the economic balance they have so

achieved needs to be protected.

The current system of price discovery through IT

enabled auction platforms, payments made through

banks and other support mechanisms provided by the

Tobacco Board for FCV, shifts significant market risks

away from the farmers. In case of alternative crops,

similar fair price discovery and other risk mitigation

processes should be available to the farmers to ensure

that this class of farmers is not exposed to higher risks

by merely substituting. The same level of support

needs to be provided at least for a transition period by

the Government.

The growers of tobacco for bidi and other products

shift from tobacco to other crops and vice versa

purely for commercial reasons and they have

experimented with various crops to find the

optimum solution for sustainable returns. Hence,

alternative crops suggested to them need to

equalise the gains they are made to give up due to

regulatory and social pressures by shifting into

crops with higher risk and lower returns.

In every farmer group meeting we had, whether in

Andhra Pradesh, Karnataka or in Gujarat, they

equivocally told us that they have no special affinity

to one crop and will shift to any viable alternative to

tobacco which gives them similar economic and

social returns.

Studies show that on the whole, an integrated

approach to tobacco control that incorporates

region-specific elements has a bigger impact in

achieving the objective of controlling tobacco

production. The supply side measures focusing on

agricultural diversification may be considered as

long-term measures to supplement the demand

side measures.

The tobacco control initiatives should focus on a

multi-pronged strategy of agricultural diversification

in a phased manner away from tobacco, use of

tobacco for alternative purposes and shifting away

from tobacco to other economic activities. Such a

multi-faceted approach is likely to be more effective

than legislation to control tobacco. Such a strategy

should evolve out of the farmers’ own initiative, and

an intensive awareness programme about damages

CONCLUSION AND RECOMMENDATIONS

41

from consumption of tobacco and advantages from

alternative uses including protein content of full-

grown tobacco plants, etc., needs to be initiated on

a massive scale.

However, some of the major tobacco growing

countries like USA, Argentina and Switzerland have

not ratified the FCTC till today. What is more,

countries like Malawi, Indonesia and Zimbabwe

have not even signed it. The non-ratification by

some countries and non-signatories countries,

therefore, creates an unfavourable environment for

countries like India as the production will shift from

India, which in turn will have a greater effect on

exports and reduction in market and most

importantly on livelihood of affected farmers.

Experiences around the globe indicate that it is

crucial to involve farmers at every stage and that

the profitability of alternative crops is the basis for

success. Region-specific characteristics define the

range of opportunities available for agricultural

development. An assessment of viable crop

alternatives must be accompanied by a clear

understanding of market conditions and their

viability and risks.

Special attention should be given to the large

numbers of women, tribals and Dalits employed in

tobacco growing and processing who do not enjoy

freedom of association and the right to collective

bargaining, with a view to providing them with

sustainable livelihoods. In view of the expressed

concerns over employment, social security and

welfare benefits, social partners and Governments

should continue to put in more efforts in addressing

the uncertainty prevailing due to the increasing

challenges in the tobacco sector.

Diversification should include both agricultural and

non-agricultural opportunities, including

transformation of one agricultural product to

another. Substitution of one economic activity by

another does not, however, fully address the

problem of the poverty and vulnerability of tobacco

farmers for whom right to livelihood is the same as

their right to life.

The voice of the farmers needs to be heard and

respected for any means that affect their lives.

42

CONCLUSION AND RECOMMENDATIONS

Disclaimer

We have exercised due care and diligence in preparing this report. While the information contained in it is of a statistical nature and has been compiled or arrived at from sources believed to be reliable, no representation or warranty is made to their accuracy, completeness or correctness, and hence Thought Arbitrage Research Institute cannot be held responsible for omissions or errors.

This document is for information purposes and to initiate a debate or dialogue with regard to its content. The information contained in this document is published for the assistance of the recipient but is not be to be relied upon as authoritative or as a substitute for the exercise of judgement by any recipient. This document is not intended to be a substitute for professional, technical or legal advice.

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This study was conducted before the origin of Telangana state. Therefore the context of the this report, shall be related to Andhra Pradesh before it's division.

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