GROWERS in Khyber Pakhtunkhwa complain of low prices offered by tobacco companies and the unmerited grading of their crop. At present, 200-250kg of barn-cured tobacco of different grades fetches around Rs30,000-35,000 which is much lower than warranted by the escalating cost of production, says a Swabi farmer Abdur Razzaq.
Tobacco, as per law, is the only cash crop whose weighted average price (Wap) must increase by a certain ratio each year.
“Though prices are supposed to be fixed in ‘consultation’ with farmers taking into account the cost of production and other factors, tobacco companies use their clout to fix prices of their own choice. They usually try to buy double the quantity of their annual purchase targets at the lowest possible price,” he said.
This season, as per assessment of tobacco growers, the average cost of production stood at Rs167 per kg. “The Wap should have been fixed at Rs200 per kg to benefit the growers, but buyers are offering between Rs125-78 per kg for different grades of recommended varieties and Rs104-95 per kg for non-recommended varieties. This shows how unrealistic is the price fixed by the Pakistan Tobacco Board (PTB). The shrinking profit margin has particularly hit the small farmers,” he said.
Last year the companies had purchased tobacco from growers at Rs103-105 per kg against the Wap of Rs98 fixed by the PTB.
“Tobacco companies earn huge profit as, according to an estimate, they prepare over 1,000 cigarettes per kg of tobacco. The influential firms are working as a cartel to increase their margins. But farmers are suffering for lack of cooperation and ignorance,” he said.
Had the companies not agreed to purchase the harvested non-recommended tobacco variety, called Swati locally, at the average support price of Rs104.30 per kg for the year, around 40 million kg of this variety would have no buyers and that would have exposed around 80 per cent farmers –that grow Swati in Mardan, Swabi and Charsadda - to huge financial losses. But thanks to the farmers’ efforts that the appalling scenario has been averted,” he said.
Asfandyar Khan, another farmer says “Farmers have greatly benefited from Swati variety as it has increased their output by about 50 per cent, saved them from the problem of grading as almost all of its leaves are of No.1 quality.”
Until recently, these companies were urging farmers to grow the Swati variety and why private buyers are taking it” he asked.
He said farmers were also unhappy over the deliberate and unfair down-grading of their tobacco. “The companies sort out the best leaves and reject the rest which is eventually purchased by private buyers. The importance of grading can be judged from the fact that for the top eight grades of recommended tobacco varieties, the average maximum and minimum prices per kg in descending order are between Rs125 and Rs107, Rs123-105, Rs119-103, Rs115-101, Rs105-94, Rs100-92, Rs90-83 and Rs82-78,” Asfandyar said.
As per the law (MLO No.487) and their written agreements with farmers, tobacco companies are to be fined if they fail to purchase the entire tobacco crop from growers but they often delay procurement or abruptly end purchasing the commodity.
“They ask us to bring our produce but they buy a little of it of their choice and close the depot. This is done precisely to make growers run from pillar to post to sell their ‘sub-standard’ tobacco on low prices to private buyers who seem to be the agents of these companies,” he added.
Tobacco companies and the PTB each year warn farmers not to cultivate the non-recommended varieties as these won’t be purchased by them, but only 10-20 per cent farmers cultivate the recommended high-yielding varieties of Speight G28, K399, RGH4 and TM 2008 and the other 80 per cent go for the Swati variety. This could either be due to their ignorance or the urge for better profit on part of the farmers.
Tobacco employs over three million persons directly or indirectly, contributes billions to national exchequer in taxes and saves billions likely to be spent on imports of cigarettes besides earning millions of dollars in exports.
KP produces between 65-85 million kg of tobacco but the output can be enhanced to 300 m/kg per year. With a possible production of 300 million kg, Khyber Pukhtoonkwa can earn $537mn annually from tobacco export. But the potential has yet to be realised. “KP grows about 98 per cent of Virginia tobacco but its membership in the PTB is equal to that of Punjab. It should be given representation proportionate to its output,” he added.