The Pakistan Tobacco Board (PTB) has raised average prices for different varieties of tobacco to Rs82 per kg, up from the current year’s Rs67.
The delayed announcement of support price was one of the contentious issues between the PTB and the growers. Until recently, the support price was announced in July-August, just before the beginning of the purchase season, leaving the growers at the mercy of tobacco companies, with no option to grow any cash crop other than tobacco.
Shahibzada Muhammad Khalid, Chairman PTB, told Dawn: “I had made a commitment to the growers that the support price will be announced before the commencement of the growing season”.
Murad Ali Khan, provincial head of Kissan Board of Pakistan, a representative body of the growers, has welcomed the PTB decision.
However, he said, “We laud the announcement, but we still have reservations about the cost of production, calculated by the PTB”. He said the growers would prefer to grow wheat because of the difference between the support prices of wheat and tobacco.” He feared that it would further reduce tobacco production.
The PTB statistics show a drastic decline in the overall tobacco production. Last year, the target for different varieties of tobacco was set at 70.983 million kg. However, the actual production was 65 million kg only.
For the next year, the tobacco companies have set a procurement target of 76.410 million kg, but it is unlikely to be met because of growers’ inclination towards wheat with a support price of Rs940 per 40 kg, observed Mr Khan.
“The growers find wheat and sugarcane as better alternatives as cost of tobacco production is much higher than acknowledged through the official support price,” Mr Khan added.
But at the same time, he also lamented that the growers are unable to procure sufficient quantity of wheat seed because of Punjab government’s ‘illegal’ ban on inter-provincial movement of wheat, and may be forced to opt for tobacco. “Tobacco will be a compulsion, not a choice” .
The bigwigs at the PTB, however, forecast no major drop in tobacco yield next year because of “the legal protection given to tobacco support price was still an attraction for tobacco growers.”
Tobacco is the only cash-crop that is legally protected, as the law binds the PTB and tobacco companies to pay not less than the support price of previous year. “This is the main attraction for the growers, as they can not secure such protection in any other cash-crop including wheat,” said Ali Gohar, Secretary PTB.
The crop offers direct and indirect employment to more than 1.5 million people and contributes more than Rs23 billion to the national exchequer in the form of various taxes besides having huge potentials for export.
The PTB secretary also said that the support price was just a benchmark; when the tobacco purchase season begins, the companies pay more than that. For example, in the current year the support price was Rs67 per kg, whereas deals were finalised at Rs80 per kg, he said.
Next year, he anticipated, the market prices would surpass the benchmark price, still keeping tobacco a good cash-crop.
The bad weather, however, is the major source of worry for him and he fears it can reduce tobacco production next year. “Most of the tobacco-growing areas did not receive sufficient rains this time which can affect the yield,” he said.
The growers, he opined, usually keep rain-fed areas reserved for producing wheat, whereas this time there was a very little rain. Therefore, they would grow wheat in irrigated land which may reduce the area under tobacco crop.
The immediate focus, he said, was on reducing cost of production for which different kinds of experiments were under way. Firewood, he said, was the major item that consumed much of the working capital of the growers, and demanded reduction in its cost.
The Research and Development Cell of the PTB is developing cost-effective coal-based alternative of firewood that will reduce half of the production cost, he said.
Likewise, he said, contacts had been made with the State Bank of Pakistan and commercial banks for small loans for the tobacco growers on soft terms especially to provide them a credit for arranging firewood.
Murad Ali Khan, however, was not satisfied with the efforts of PTB for the promotion of tobacco production. He said, “Every year we discuss these things in meetings with the PTB and officials of the tobacco companies, but to no avail.”
Just for example, for securing credit line for farmers even the Bank of Khyber, which is owned by the Frontier government, demands two government servants as sureties for loan.
“Is it possible for poor farmers to arrange two government servants as their guarantors for loan?” questioned Mr Khan.
The PTB had also acknowledged that formalities of the commercial banks were an impediment for the growers in obtaining loans from the banks. However, steps were being taken to address the issue.
“We have asked the commercial banks to consider the agreements between farmers and tobacco companies as a guarantee for extending loan facility to growers,” said Mr Khalid.
An early announcement of support price is to boost production but it is unlikely to increase its export despite the fact that the quality of tobacco produced here has no match.
Currently, Pakistan exports tobacco to 23 countries of almost every continent, but its volume is gradually declining. According to the PTB, the country’s tobacco export in 2004-05 was worth Rs673.61 million which declined to Rs454.147 million in 2007-08.
The PTB head opined that maintaining consistency in quality, standard and production were the major areas, where a lot had to be done before exploring new international markets.
“We grow the world’s finest quality of flue-cured Virginia tobacco, even then its export is not picking up mainly because the multinational companies don’t want this,” lamented Mr Khan.
Reducing cost of inputs and introducing cost-effective technology were the simple remedies for increasing the tobacco production, Mr Khan added.