Alternatives to Flue Cured Virginia Tobacco Cultivation: Preliminary Observations from A Tobacco Growing Region in India

Introduction

In India tobacco is grown on around 4.93 lakh hectares of area accounting for about 0.24% of total arable land in the country (Tobacco Board 2013). India accounts for 10% of world’s area under tobacco and about 9% of tobacco production (www.ctri.org.in). India produces on an average 800 million kg (dry weight) of tobacco (Tobacco Board 2013). India emerged as the second largest producer of tobacco (www.statista.com) in the world replacing USA, in 2002. Tobacco is a half yearly crop. Indian farmers are growing tobacco for several years and are acquainted with its cultivation practices. Tobacco is grown largely in 15 states of the country. Flue Cured Virginia (FCV), cigar, cheroot, bidi, chewing, hookah, snuff, natu and burley tobacco are grown in different parts of the country. While FCV tobacco is generally used for cigarette making, some quantity of burley and natu tobacco is used as blends in cigarette making. FCV tobacco is grown in Karnataka and Andhra Pradesh (AP). Small quantity of this tobacco is also grown in Orissa (Rayagarh) and Maharashtra (Gadchiroli). Tobacco is a commercial crop and contributes to the exchequer in terms of foreign exchange and excise earnings and supports people engaged in production, processing, marketing and exports including farmers, bidi rollers, tendu leaf-pluckers and retailers. It contributed 19,891.50 crores as excise duty and 4979 crores in foreign exchange to the national exchequer in 2012-13 (Tobacco Board 2013).

However, tobacco is considered a de-merit good because of the adverse effects on the health of its consumers (A de-merit good in economics refers to a good or service, which is unhealthy or socially desirable. And the negative effects of the good or service may be unknown or ignored by consumers. Sometimes its consumption may have adverse effects on third party due to its negative externality. And, sometimes a de-merit good may be over consumed if left to market forces and, therefore requires government intervention to regulate its production and supply). The increasing evidence on the adverse health consequences of tobacco consumption has intensified worldwide efforts to combat its use and production. WHO predicts nearly one million deaths every year in India on account of tobacco consumption and passive smoking. Article 17 and 18 of WHO’s Framework Convention on Tobacco Control (FCTC) lay stress on existing gaps in research and emphasize that the parties should promote research related to health/ environmental and socio-economic aspects and economically viable and sustainable alternatives to tobacco crop. Therefore, in addition to the taxation policy that aims at reduction of demand, an important state policy action under review, in developed and underdeveloped countries is to curb tobacco production by encouraging the cultivation of alternative crops and alternative livelihoods. India is one of the Parties to the FCTC, which is an international treaty that sets out obligations for countries to effectively reduce tobacco use. As a party to the treaty, India is obligated to take measures to bring down the consumption and production of tobacco in the country through an array of measures to be implemented gradually over the years.

Tobacco cultivation in India, particularly Flue Cured Virginia (FCV) tobacco used for cigarette making has been enjoying institutional support since several years, while on the other hand the Central government has been targeting cigarettes with tax hike in almost every budget.  This indicates a paradox in the public approach to tobacco control. On the one hand government has initiated measures to combat tobacco consumption and on the other it promotes cultivation of tobacco, its sale, trade and exports. This is because different ministries of the government engage in promotion and prevention of tobacco use simultaneously. The overall losses due to tobacco use would surpass the gains if we take into account the health care costs, burden of mortality and environmental consequences of tobacco. Its cultivation causes problems generally referred to as ‘Green Tobacco Sickness” and a cause of environmental concern as fuel-wood is used extensively in its curing. Use of fertilizers is also higher in tobacco cultivation.

Then why do the government and policy makers are rigid on reducing the use of tobacco in the country? Although political motive exists in refraining from increasing tax rates on bidis and restricting tobacco cultivation, the government has been justifying its action on the grounds of large scale employment that is associated with tobacco. Thousands of farmers are engaged in cultivating different types of tobacco in the country. Everyday around 4 million people are rolling bidis in India, two-third of them being women. In addition farmers, retailers, processors, tendu leaf pluckers are dependent on tobacco for their livelihood. More importantly tobacco is one of the main sources of revenue to government. Tobacco contributed around 11% of the excise revenue in 2012 (CBECDDM 2013) and accounts for about 4% of the total value of India’s agricultural exports (www.ctri.org.in/) resulting in substantial foreign exchange earnings. The net returns from tobacco on an average appear to be 2-4 times higher than other crops like groundnut, cotton, black gram in Karnataka, Gujarat and Andhra Pradesh. This is the reason why farmers go in for tobacco cultivation

Economics of Tobacco Cultivation-Research Context and Review

There are some efforts being put in by the government to gather information on alternative farming and livelihoods although the magnitude of the effort and the coverage is too less, disintegrated and not continuous. The main reasons could be lack of coordination between concerned ministries and delays in taking decisions and implementation. Any kind of intervention to reduce supply of tobacco requires data on number of growers, socio-economic status of growers, feasibilities of alternative crops, availability of infrastructure, identification of factors that could enable shifting, and about farmers’ willingness to shift from tobacco cultivation. Unless such information is made available it is difficult to develop a comprehensive rehabilitative plan. Articles 17 and 18 of WHO’s FCTC lay stress on these points calling the tobacco growing countries to update their information on social and environmental costs of tobacco cultivation, scope for alternative crops and livelihoods and the need for involvement of farmers in decision making.

On tobacco cultivation, however there are very few economic studies in particular. As many tobacco farming studies are either based upon secondary statistics or crop budget analysis, there has been little scientific investigation of what farmers think (Geist et al., 2009) on tobacco cultivation and diversification. Based on the information collected from multiple sources including published literature, public testimonies and mail/telephone based sample survey of 100 farmers drawn from Tanzania, Germany, Taiwan and Brazil, Geist et al., (1999) confirm the trend in global shift of tobacco cultivation in to developing world and indicate the existence of more opportunities for diversifications. But, they find little effort put in this direction, particularly addressing the poor farmers. The computer assisted telephone interview of 1200 households in North Carolina (Altman et al., 1995) reveals the fact that as a whole, no other commodities generated the profits that tobacco produced per acre. Although there were individual specific profits with other crops, they were accompanied by huge investments in the rural infrastructure.

The price of the output, cash loans, availability of family labour, educational level and, access to fertilizers were stated to be the reasons explaining cultivation of tobacco according to a study carried out by Abdallah et al (2007) in Iringa district of Miombo woodlands of Tanzania. Similar results came out from a study by Akhter (2006) in Bangladesh. Cash earnings, perceived high profits, guarantee of inputs and market, credit advance and involvement of farmers through company cards played a major role in continuing tobacco cultivation in Bangladesh. In addition as revealed by this study there was commitment from the tobacco companies to procure tobacco leaves from the farmers directly on cash payment. On the other hand lack of support to food crops were reported to be making farmers not to continue their cultivation.

A study by Kibwage et al (2008) carried out in South Nyanza region of south western Kenya covering Kuria, Migori, Homa Bay and Suba districts showed that the bamboo cuttings planted under the same natural tobacco growing conditions in five zones with different land conditions could do well in tobacco region. But, they emphasized the need to extend the study to remaining tobacco zones to examine the replication of their findings.The study was carried out on 120 field experimentation sites where 2420 bamboo cuttings were planted. Capacity building through training and empowerment in bamboo farming and processing is recommended by authors as essential components facilitating diversification.

As we look into the literature in the Indian context there is absolute dearth of information on tobacco growers, particularly FCV tobacco cultivators for e.g. their background, perceptions on tobacco cultivation, hardships, alternative crops, etc. Results from some of the studies/experiments carried out in India discussed below indicate that shifting from tobacco is possible. A brief analysis of the cost: benefit ratio of tobacco and alternate crops suggests that although the returns are not very attractive for other crops, tobacco is not an ultimate for the traditional tobacco soils.Net returns for ground nut, red gram, soy bean, chilly and intercropping of various crops have been favourable in some regions. Farmers in Nippani tract of Karnataka have started growing sugarcane, banana and soy bean. In Gujarat farmers have been experimenting with banana and mustard in traditional tobacco soils. In 2000-01, farmers in Andhra Pradesh were encouraged to grow alternative crops due to crop holiday announced by Tobacco Board. Farmers’ meetings, suggestions on raising alternative crops, transfer of technology on alternatives crops, bank loans and supply of appropriate seeds were instrumental in inducing change. As a result of this intervention in 2004-05 crop seasons, farmers in central black soil region had diverted 20% of their land under tobacco to Subabul (Social Forestry)[1]. In central black soil / northern black soil and southern black soil areas the cultivation of cotton and chillies had increased. This shows that if, concrete efforts are put in by the government there can be a gradual shift from tobacco.

In Karnataka, Satyapriya and Govindaraju (1990) found that although net returns per hectare were more from bidi and FCV tobacco, the net income per rupee of investment was higher for groundnut (Rs.1.73) than bidi tobacco (Rs.1.50) and higher from horse gram (Rs.1.60)  than FCV tobacco (Rs.1.18). However, they concluded that given the existing level of technology, the possibility of an alternative crop to tobacco, purely on economic grounds, does not exist. In another study carried out by Panchamukhi et al., (1998) the net returns per rupee of investment were found to be higher for sugarcane (Rs.0.87) than bidi tobacco (Rs. 0.57). Soy bean was next best crop, which earned returns (Rs.0.43) nearer to bidi tobacco.

In India reports on comparative experiments carried out by Agricultural Research Stations CTRI, Rajahmundry (1991-96) and Agricultural Research Station (ARS), Nippani (1992-94) at several intervals indicate net returns to be favourable for tobacco as a single crop, particularly in the case of FCV tobacco. But, with mixed cropping the returns were higher for crops other than tobacco. In bidi tobacco region of Nippani the field study by Bhat et al (1998) found returns to be higher for mixed crops as compared to tobacco.

Dinesh Kumar et al., (2010) from their study in Shimoga district of Karnataka carried out for three successive years (2003, 2004 and 2005), found sole FCV tobacco to be the most remunerative crop. However, they found that mixed cropping of other crops was more profitable

than tobacco. In the absence of single alternate crop to tobacco, the study suggests mixed cropping of hybrid cotton + chilli + groundnut and, hybrid cotton + chilli + French bean as alternative crop package to FCV tobacco. A recent study by Rao and Nancharaiah (2012) carried out in Prakasam district in Andhra Pradesh reveals paddy and Bengal gram to be more profitable than tobacco. The average input-output ratio per acre for all categories of farmers was found to be Rs.1.21 for paddy as against Rs.1.09 for tobacco in irrigated area and Rs. 1.34 for Bengal gram as against Rs. 1.11 for tobacco in rainfed area. The net returns per acre were higher by 60% for paddy in irrigated area and by 88% for Bengal gram in rain-fed area as compared to tobacco. The researchers state that many farmers in these villages have already given up tobacco and are growing other crops due to low price for tobacco, high cost of production and decreasing international demand.

In the background of the available literature discussed above a modest attempt has been made in this study to fill in the gap that exists in the available literature about situational analysis of economics of tobacco cultivation, identify economically viable alternate crops if any for FCV tobacco and challenges in shifting with reference to FCV tobacco in Karnataka.

Materials and Methods

This study is based mainly on primary data collected from tobacco grower and non tobacco grower households. The field survey was carried out in 2010 covering 2009-10 agriculture season. It should be noted that most of the districts in Karnataka were hit by heavy or excess rainfall during 2009 crop season as a result of which there was crop loss in many districts including tobacco growing region.

Hassan and Mysore are the two main districts growing FCV tobacco with their respective share of 80% and 17% in total production. FCV Tobacco cultivation is found extensively in Hunsur, Periyapattana, KRNagar and H.D.Kote taluks of Mysore district. In Hassan district it is grown mainly in Arakalgudu and Holenarasipura taluks. Both the districts are covered for the household survey. Total area under FCV tobacco in Karnataka during the year 2009 was 107,000 ha. All the blocks having more than 1% of registered tobacco growers (as percentage to total growers in the region) are included in the study. The number of villages covered for household survey is 20 allocated to selected six blocks of two districts in proportion to the percentage share of tobacco farmers per block to total tobacco farmers of the two districts. The first 20 villages with higher number of tobacco growers from the six blocks of two districts are included in the study. The number of households surveyed in each village is in proportion to the number of tobacco growers to the total tobacco growers of the selected 20 villages. The details of registered tobacco growers and the area planted in 2009-10 crop season for the States growing tobacco are given in Table 1 below.

Table 1: State-Wise Details of FCV Tobacco Growers and Area Planted (2009-10).

Sl. No.	States	No of Growers	No of Barns	Area Planted (Hectares)
1.	Andhra Pradesh	46974	40053	149936
2.	Karnataka	41038	56353	106602
3.	Maharashtra	26	38	75
4.	Orissa	84	102	212
	Total	88551	96546	256825

Source: Tobacco Board, 2012 (indiantobacco.com)

The number of farmers registered for 2009-10 crop season was 41038 in Karnataka. This accounted for 46% of licensed tobacco growers in India. We covered around 1% of the registered FCV tobacco growers in Karnataka for the household survey, which amounted to around 400 tobacco growing households. To get a comparative picture of socio-economic status of households not growing tobacco and the reasons thereon for not cultivating tobacco, we tried to cover in each selected village 2 households growing crops other than tobacco. This was our control group. Although the targeted sample of non-tobacco households was 10% of the main sample i.e. 40 non-tobacco growers from 20 sample villages, we could not get any non-tobacco household in one of the villages and could get only one non-tobacco household in two of the villages. So the control group included only 36 non-tobacco growing households. So, in total we covered 436 farm households in our study. Structured and pre-tested schedules were used as instruments of data collection. These schedules facilitated collection of  information on viz. socio-economic status of farm households, cropping pattern, cost of cultivation for different crops, yield, crop-wise income, livelihood sources and income, access to infrastructure, crop incentives/benefits, experiences with cultivation of other crops, willingness to shift from tobacco to other crops, etc.

In this study, we follow a simple calculation of costs to return based on the information on total costs of cultivation and returns in terms of gross income earned and net returns from the sale of crops. The production cost including expenditure on seeds, fertilizers/manures, labour, curing of the product, packaging and transport and any miscellaneous items is subtracted from the gross income accrued from the sale of crops or total value of the crops. The returns are calculated per standard unit of cultivated area and also as per unit of investment expressed in terms of one rupee (INR).

Results and Discusssion

What Promotes FCV Tobacco Cultivation?

The cultivation, marketing and sale of FCV tobacco in India has been promoted by the Tobacco Board, which is established by Government of India under the Tobacco Board Act of 1975. It regulates production and promotes marketing in India and overseas.  The Tobacco Board Act aims at planned development of Tobacco Industry in the country. It arranges for auction of tobacco crop by establishing auction platforms for sale of FCV tobacco by registered growers and propagates information useful to the growers, dealers and exporters of FCV tobacco and manufacturers of tobacco products. It has been promoting tobacco grading at the level of growers and encourages scientific, technological and economic research for promotion of tobacco industry.

The information gathered from the Tobacco Board reveals that it provides subsidy to SC/STs, women, small and marginal and other farmers growing FCV tobacco, through supply of inputs viz., weighing scales, trays, tarpaulin sheets, insulation of barns, etc., and arranges for on-farm extension in the form of Model Project Area to help produce quality crop. The details of facilities extended annually by the Tobacco Board are given in Table 2 below.

Table 2: Extension Facilities Extended by Tobacco Board (2008).

Name of the scheme	No. of Beneficiaries	Financial Expenditure (Rs. In lakhs)
1. Farm Mechanization	8751	127.94
2. Improving Yield & Quality of FCV tobacco	6064	75.63
3. Improvement of curing practices	7533	60.41
4. Model Project Area	26213	28.42
	48561	292.40

Source: Tobacco Board [accessed on 5-08-2011 at tobaccoboard.com]

In 2008, the Tobacco Board provided assistance to 48561 beneficiaries worth Rs. 292.4.lakhs. Other facilities extended by the Tobacco Board include, fixing of modified (venture) furnaces in place of traditional furnaces in the tobacco curing barns, insulation of barn roof, training on post harvest project management, loan tie-up arrangement with banks, training programmes for the benefit of farmers and field staff in collaboration with CTRI and Research Wing of ITC – ILTD (Indian Tobacco Company- Indian Leaf Tobacco Development Division) at different stages of crop growth, etc. Study tours, workshops and field visits are arranged for farmers to get them acquainted with the latest improved practices and adopt the same in their own fields. In addition, the Tobacco Board organizes supply of various inputs viz. fertilizers, pesticides / fungicides to growers every year at competitive prices and offers input loans at a competitive rate of interest of 6% to 6.5% per annum. In 2010-11FCV tobacco growers in Karnataka received fertilizers amounting to 34299.35 tons (Tobacco Board, Annual Report 2010-11) at a cost of less than Rs. 20 per kg.  Quality seeds are procured from CTRI and ITC Ltd and supplied every year to the growers in the states of Andhra Pradesh and Karnataka at auction platforms. During the year 2009-10, a “Tobacco Board’s Growers’ Welfare Fund”, was created to implement the “Tobacco Board’s Growers’ Welfare Schemes”, with one time contribution of Rs.17.5 crores by the Tobacco Board.  This is subject to the contribution from growers and the Tobacco Board in the ratio of 1:2 (Department of Commerce at commerce.nic.in). Over and above all these measures the Tobacco Board honors the best growers for achieving higher yields every year to encourage quality production and competition among the growers. It is clear from above discussions that FCV tobacco is a protected crop receiving institutional support at all stages of crop production right from supply of seeds/ seedlings to marketing of the crop. Any substitution to this crop has to be looked in this background considering infrastructure and other facilities available to tobacco growers.

Farm Household Characteristics-Tobacco Growers Vs. Non-Tobacco Growers

The household survey data shows that a majority (66%) of the tobacco growing households belong to backward castes in addition to 18% belonging to SCs and STs who follow Hindu religion. Only 6% of the households belong to Muslim religion. On farm agriculture is the main occupation (96%) of the households and around 2% have self-owned business. But, 23% of families reported agricultural labour as their sub-occupation. Other sub occupations reported by farm households include self-owned business (7.5%), salaried employment in private sector (5%), casual labour (3%) and agriculture (2.5%). Although 50% of the households own livestock viz. cow (29%), sheep (2%), goat (2%), chicken (3%), buffalo (5%), none reported livestock as the main occupation and less than 1% reported it as one of their sub occupations. Around 50% of the heads of households are illiterate, but 25% have education from the level of matriculation to graduation. As we investigated for the highest level of education in a family, it was found that 5% of the tobacco households do not have any educated members (totally illiterate families) and 17% of the families have at least one member who has completed graduation.

Since farmers reside in villages, except one all others have their own houses to live in. None of them live in huts and have decent houses to live in with availability of drinking water facility through private taps. According to Below Poverty Line (BPL) cards issued by government to identify beneficiaries under Public Distribution System (PDS), 56% of the households, which possess these cards can be considered as poor. But, if we consider the total annual income of the households none of the households fall below poverty line and earn >12,000 p.a., which generally was considered as the threshold for declaring provision of benefits to households under different poverty alleviation programmes of the government in rural Karnataka (see Table 3 below).

Table 3: Distribution of Households According to Annual Family Income (Rs.).

Category of households	Income category
	<=12,000	12,001-50,000	50,001-1,00,000	1,00,001-3,00,000	>3,00,000
Tobacco households	0.0	0.75	5.0	73.25	21
Non-tobacco households	0.0	52.8	41.7	5.5	0.0

 

The social background of non-tobacco households in terms of religion and caste is almost similar to that of tobacco households except that a higher percentage of non-tobacco households belong to backward castes. Illiteracy appears to be higher among non-tobacco households as 61% of the heads of the households are illiterate as compared to 50% of the heads of households in tobacco growing households. Other than this we did not find major differences between the two categories of households in attainment of highest level of education of the household members. By counting of family cards given to beneficiaries of PDS, it is found that the percentage of households lying below poverty (BPL) is higher among non-tobacco growing households (83%) than among tobacco growing households (57%). The percentage of households owning irrigated land is also higher among tobacco households than non-tobacco households. And only 55% of non-tobacco households have private tap connected to their houses as against 77% of tobacco growing households having private tap connected to their houses for collecting water.  If we look into other socio-economic characteristics of tobacco vs. non-tobacco households (Table-4), at the very first glance it appears that most of the characteristics are supportive or conducive to the cultivation of tobacco.

Firstly, tobacco cultivation is a labourious activity involving various stages of production viz. bed preparation, seedling, nursery maintenance, planting, weeding, application of pesticides, leaf plucking, curing, grading, packaging, transport and auctioning of leaves. In rural areas it is very difficult for farmers to get hired labour. Therefore, family labour assumes importance in tobacco cultivation. It should be noted that the average size of the family in tobacco households is higher than that in non-tobacco households. And 50% of the tobacco families stay in joint families as compared to 36% of the households in non-tobacco households.

Table 4: Comparative Scenario of Tobacco Vs. Non-Tobacco Households.

Sl. No.	Categories	Tobacco Growing Households		Households Growing crops other than Tobacco
1.	Average household size (Nos.)	5.82		4.36
2.	Average land holdings (acres)	3.84		1.60
3.	Average irrigated land (acres)	0.42		0.70
4.	Category of farmers
	Marginal (%)	48.25		91.67
	Small (%)	34.25		5.55
	Medium (%)	13.75		2.78
	Large (%)	3.75		0.00
5.	Joint Family (%)	50.0		36.0
6.	Occupation	Main	Sub	Main	Sub
	Agriculture (%)	96.0	2.5	42.0	50.6
	Agri. Labour (%)	0.75	23.0	42.0	19.0
	Salaried (govt /pvt)   (%)	2.00	5.0	5.5	2.8
	Self owned (%)	1.75	7.5	11.0	5.5
	Livestock (%)	–	0.5	–	5.5
	Casual labour (%)	0.50	3.0	–	5.5
7.	Average total annual  income (all sources) (Rs.)	2,39,878		54,460
8.	Average annual income (agriculture)(Rs.)	2,11,000		19,997
9.	Share of agricultural income in total (%)	87.96		36.72
10.	Population in working group (15-70) (%)	74		74
11.	Family members engaged in agricultural work (%)	55.28		51.59
12.	Reported child labour (%)	2.00		—

 

Secondly, the cost of tobacco cultivation is higher as compared to other crops and as such the farmers would benefit from cultivation on larger holdings due to economies of scale. From Table-4 we can see that the average land holding in tobacco growing households is significantly higher than the average size of holdings of non-tobacco growers. None of the non-tobacco growers are large farmers. Even the share of small and medium farmers among non-tobacco growers is less than 10% with majority (92%) being marginal farmers (see fig-1).

Figure 1: Distribution of households according to category of land holdings. Click here to View figure

 

Thirdly, the average size of irrigated land is lower among tobacco growers and it should be noted that tobacco is a rain-fed crop. So ownership or access to irrigation facilities could induce farmers to try other crops. Fourthly, the total average annual income of the households from different sources including agriculture, rental sources, livestock and salaried employment is higher by a significant 3.4 times for tobacco growing households as compared to the total income of non-tobacco households. The agricultural income contributes 88% of the total income for tobacco households, whereas, it is only 37% for non-tobacco households. The share of other income sources is higher for non-tobacco growers indicating their dependence on other activities.

The percentage of household members engaged in agriculture is also higher in tobacco growing households (55.28%) than in non-tobacco households (51.59%). The demand for labour seems to be higher in tobacco growing households as around 2% of children were reported to be involved in agricultural work, whereas none of the non-tobacco households reported child labour.

Cropping Pattern

Tobacco occupies around half of the cropped area followed by ragi (20%) a local staple food, hurali (6.96%), alasandi (6.56%), peas (5.75%) and paddy (5%) for the sample households. The cropping pattern of Mysore and Hassan districts reflect almost similar pattern with respect to percentage of land under different crops. Tobacco, hurali, ragi, alasandi and paddy are the common crops in both the districts and the percentage of land allocated out of the total cropped area is also similar for each crop in two districts. Only in the case of peas there is a variation in cropped area. Peas are grown in 6.81% of the cropped area in Mysore as compared to 1.09% of land in Hassan district. Among non-tobacco farmers 55% have access to irrigation and half of these farmers grow paddy. While 29% of the tobacco growers have irrigated land accounting for 18% of their total owned land 28% of the non-tobacco growers own irrigated land, which accounts for 28% of their total owned land. The major differences between irrigated and non-irrigated land is found in the share of land under tobacco, paddy and hurali. The share of tobacco, hurali and, other food crops like peas and ragi is higher in land owned by non- irrigated farmers as compared to their respective shares in land owned by farmers with irrigated land who are likely to grow paddy also.

Cost of Cultivation

The information on the cost of cultivation including seeds, fertilizers, pesticides, labour, curing, packing/transport and other items was collected for the reference year (previous year of the study i.e., 2009-10 agricultural season) for different crops from tobacco and non-tobacco growers. The results are given in Tables 5 and 6 below. The cost of curing contributes to almost half (44%) of the cost of cultivation in tobacco. Generally in all other crops, payment for labour is a major cost component. Expenditure on fertilizers is the second major component of the cost of cultivation in majority of the crops with an exception to ginger, wherein more than 35% of the cost is on seeds. Among the households growing FCV tobacco with other crops the average cost per acre are higher for cash crops and highest for ginger followed by tobacco, sugarcane, chilly and turmeric. The average total cost of cultivation per acre is lowest for hurali followed by peas and ragi. However we need to look into the cost of cultivation of each crop in comparison to their returns per unit of land cultivated in the reference period.

Economic Returns

Following from the discussion in earlier section, although the average total cost of cultivation per acre was the lowest for hurali it is not a profitable crop. The net returns and returns per rupee of investment are also lowest for hurali indicating that although the costs are lower, it is neither a substitute to tobacco nor a profitable crop due to lower returns.Overall, the net returns per acre were higher for cash crops and highest for ginger followed by tobacco, sugarcane, chilly and turmeric.

Table 5: Crop-Wise Distribution of Costs of Cultivation and Returns for Tobacco Growers (Rs.).

Sl.No.	Crop	Crop area (acres)	Average cost/acre	Net returns per acre	Net returns per rupee of investment
1.	Tobacco	1431.22	31532	18396	1.58
2.	Hurali	197.47	1685	385	1.23
3.	Sugar cane	2.00	28000	12000	1.43
4.	Peas	163.03	2971	1672	1.56
5.	Ragi	566.71	3545	1714	1.48
6.	Tadni	185.97	1978	1515	1.77
7.	Chilly	7.50	11527	11620	2.01
8.	Ginger	10.00	50830	24670	1.48
9.	Oil crops	34.25	6417	3174	1.49
10.	Jowar	26.50	3841	6431	2.67
11.	Paddy	141.73	7037	4345	1.62
12.	Plantation	23.10	5922	11329	2.91
13.	Others	48.00	5946	-956	0.84
14.	Total	2837.48	17873	10361	1.58

Note: There was failure of some crops due to heavy rains in the reference period

When we compare returns per rupee of investment (Table5), crops like jowar (Rs.2.67), chilly (Rs.2.01), alasandi (Rs.1.77), paddy (Rs.1.62) appear to bring in higher returns for every rupee spent by farmers. Although net returns per rupee of investment is highest for plantations (Rs. 2.91), it would be inappropriate to include these in the list when we are considering feasible or profitable alternatives to tobacco cultivation. Plantations, particularly coconut and areca nut yield returns in the long run and cannot be proposed as an immediate alternative or as short term measure. However,  farmers can be motivated to keep aside a part of their land for plantations as the returns for invested money is higher in the long run as compared to other crops because of the low maintenance costs. By doing so, the land under tobacco can also come down.

Figure 2: Crop-wise Net returns per acre for Tobacco growers (Rs.). Click here to View figure

 

Taking into account the reported data on costs and returns it can be assumed that ginger in Karnataka light soil region is a profitable crop. The fact that only 2% of the farmers have cultivated ginger indicates lack of awareness among farmers about the economics of ginger including marketing and suitability of the crop to local soil conditions. Crops other than ginger earn fairly lower net returns per acre as compared to tobacco. Net returns per rupee of investment indicate jowar, chilly, alsandi and paddy to be profitable than tobacco, while ginger, sugarcane and peas bring in returns nearer to that from tobacco. So, farmers from selected regions can be motivated to grow ginger and chilly in addition to mixed cropping of food crops.

It should be noted that even if crops like ginger and chilly can be remunerative, tobacco farmers are not inclined towards cultivation of alternatives because they do not get timely credit, fertilizers, pesticides, seedlings and market facilities, which are available and facilitated by Tobacco Board for FCV tobacco.

Table 6: Crop–Wise Distribution of Costs of Cultivation and Returns (Rs.) for Non-Tobacco Growers.

Sl.No.	Crop	Crop area (acres)	Average cost/acre	Net returns per acre	Net returns per rupee of investment
1.	Hurali	3.525	1374.47	1831.2	2.33
2.	Peas	2.05	3726.83	-1629.27	-0.56
3.	Ragi	20.55	5462.29	2673.96	1.48
4.	Tadni	4.4	2153.41	846.59	1.39
5.	Ginger	0.75	40533.33	26133.34	1.64
6.	Oil crops	18.45	4894.31	5197.83	2.06
7.	Jowar	3.075	4006.50	11147.97	3.78
8.	Paddy	15.11	6669.09	4575.12	1.69
9.	Plantation	1.0	1000.00	9000.00	10.00
10.	Others	3.0	7226.67	773.33	1.11
11.	Total	71.91	5432.90	4060.91	1.75

 

Among non-tobacco growers, the cost of labour constitutes highest component of cost chunk followed by fertilizer and seeds in total cost of cultivation of different crops except ginger wherein the cost of seeds takes away 50% of the costs. Ginger earns highest net returns per acre for non-tobacco growers also (Fig- 3). However, due to high cost of cultivation the net returns per rupee of investment are lower for ginger than returns from other crops. The net returns per acre as well the net returns per rupee of investment are higher for plantation, oil crops. Although ragi a local food crop earns less than the average net returns it constitutes highest share of cropped area (29%) followed by oil crops (26%) and paddy (21%). The cost per unit of cultivation is lower for hurali a local pulse, which also earns comparable net returns per rupee of investment. But, net returns per unit of cultivation for this crop are not so favourable. As said earlier most of the crops suffered loss due to heavy rain during the reference period.

Figure 3: Crop-wise Net returns per acre for non-tobacco growers (Rs.). Click here to View figure

 

Credit Worthiness of Tobacco Vs. Non-Tobacco Farmers

Details of credit availed by tobacco and non-tobacco growers during the reference period indicates the extent of importance given to tobacco cultivation (Figures 4 and 5). While tobacco farmers get 61% of the credit from banks, non-tobacco growers receive only 26% of their credit need from the banks. As a result, the dependence of tobacco growers on money lenders (10.3%) and other private sources like relatives and friends (25%) is lower as compared to non-tobacco growers whose dependence is largely on moneylenders (22%) and other private sources (52%). Taking loan from moneylenders and relatives at higher rate of interest is risky for the farmers as they are likely to fall in to debt trap. Tobacco growers also reported that they had received loans from Tobacco Board for purchase of inputs, fertilizers, etc. But, in real terms Tobacco Board does not give loans to farmers. It providefertilizers and other inputs at subsidized rates. Farmers consider their dues to Tobacco Board (which it deducts directly from the amount received by auction of tobacco) as loan amount. The average interest rates for banks turned out to be 7.8% p.a. while that of money lenders and other private sources is 46.2% and 63.3% p.a. respectively. While the difference in interest rates varied from 1% to 36% for bank loans, the variation in minimum and maximum interest rates were 1% and 80% respectively for private loans.

Figure 4: Distribution of loan availed by tobacco growers according to source (%). Click here to View figure

 

Figure 5: Distribution of loan availed by non-tobacco Growers according to source (%). Click here to View figure