Permit regulated FDI in tobacco: Parliamentary panel on Commerce recommends

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Updated: Aug 26, 2020 6:41 PM

The panel underscored the significant role of Agriculture Export Policy in doubling farmers' income and integrating agriculture sector with global value chain.

Remission of Duties or Taxes on Export Products (RoDTEP) is a scheme for exporters to reimburse taxes and duties paid by them.

For providing benefits to farmers, a parliamentary panel has recommended permitting regulated foreign direct investment in the tobacco sector and establishing export-only tobacco farms to boost outward shipments.

The Parliamentary Standing Committee on Commerce and Industry, chaired by YSR Congress leader Vijaysai Reddy, made these recommendations in its report submitted to Rajya Sabha Chairman M Venkaiah Naidu on Wednesday. The report is likely to be tabled in the upcoming session of Parliament.

According to the report, the committee is of the opinion that the FDI in tobacco sector albeit in a regulated manner would stimulate the production and processing of Indian tobacco, thereby boosting its export.

“The committee, therefore, recommends the Department to undertake a study to analyse the prospects of opening FDI investments in the tobacco sector at the earliest,” it said.

Currently, FDI (Foreign Direct Investment) is prohibited in manufacturing of cigars, cigarettes and tobacco substitutes.

The panel has also suggested making available sufficient funds for research and development activities, imposition of levy on sale of cigarettes to utilise it as a Market Stabilisation Fund to ensure price security to tobacco growers in times of market crisis and extension of export incentive schemes to tobacco exporters.

Further, the committee has recommended that the Department of Commerce in coordination with Ministry of Agriculture and Farmers’ Welfare undertake measures to prevent further shrinkage of land under tobacco cultivation as well as “explore the feasibility of establishing export-only tobacco farms specifically for export purpose”.

Pushing for similar export incentives to tobacco and its products as provided to other agricultural and plantation commodities, the panel said the proposed scheme of RoDTEP should extend the export benefits to tobacco and tobacco products in order to provide a level playing field to Indian tobacco exporters.

Remission of Duties or Taxes on Export Products (RoDTEP) is a scheme for exporters to reimburse taxes and duties paid by them.

India produces about 800 million kilograms of various types of tobacco every year. The states of Andhra Pradesh and Karnataka are the main producing states.

The country is the third largest producer and exporter of tobacco in the world and contributed Rs 6,001.02 crore in 2018-19 in terms of foreign exchange to the exchequer.

Besides exporting tobacco, the country also exports a variety of tobacco products such as cigarettes, cut tobacco, bidis, hookah, different varieties of chewing tobacco, snuff and cigars.

While voicing concern over low share of export of agricultural commodities as compared to their total production, the panel called for renewed focus on post harvest infrastructure, supply chain, value addition and exploring new overseas markets for promoting export of agricultural, marine and plantation commodities sector.

The panel underscored the significant role of Agriculture Export Policy in doubling farmers’ income and integrating agriculture sector with global value chain. It also suggested restructuring of Spices Board and to explore the feasibility of fixing a minimum support price for turmeric crop.

Welcoming the renewal of the Indian-Chinese Phytosanitary (related to plant) protocol on reviving the export of tobacco leaves to China, the committee said that all efforts including consultations with the Chinese government should be made to restart the export at the earliest.

Quality tobacco at par with international standards is available in India at competitive prices and there is good potential for export of Indian tobacco to China. The revival of the phytosanitary protocol with China will pave the way for revival of Indian tobacco exports to China and prove economically beneficial to Indian farmers.

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