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Global tobacco glut to hurt India

Sunanda Sanganeria

A global glut in tobacco and the loss of the Russian market to China will have adverse affect on the tobacco sector. Also, the depressed prices at the auctions will affect the tobacco growers in the country.

However, the impact of the glut will largely be felt by the tobacco growers in Andhra Pradesh because they will be saddled with surplus crop. While the auctions are over in Karnataka with a sale of around 60 million kg, they are mid-way in Andhra Pradesh.

The auctions in Andhra Pradesh, which commenced on a sluggish note in March 2002, were progressing at a slow pace.

Trade sources said that the slow offtake was due to the glut in the world market. It's been estimated about 30 per cent of Andhra Pradesh's produce of around 110 million kg has been sold.

Traders feel if the situation continues, the auctions in Andhra Pradesh scheduled to end in June, were likely to extend till mid-July.

Due to a crop holiday in Andhra Pradesh last season, India lost part of its export markets to China, the largest grower in the world. "We have almost lost the 20-million-kg market of Russia," a trader said.

While the Tobacco Board fixed the authorised crop size in the Andhra Pradesh at 97.5 million kg, the total produce is estimated at 110 million kg. Farmers of Andhra Pradesh were expecting better prices from the current crop. However, the average auction price was hovering around Rs 40 a kg. The delay in completing the auctions is likely to compound their problems.

The Tobacco Board has asked the trades to participate in the auctions and honour their commitment. It has also warned that action will be taken against traders who failed to do so.

To revive interest in auctions, the state government has sanctioned Rs 130 million to the tobacco growers society of Ongole. This was expected to stabilise the market, sources said.

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