New Delhi, Feb 10 (.) The Tobacco Board has urged the union government to reconsider the recent hike in excise duties on cigarettes, warning that the move could sharply increase illicit trade and severely impact millions of tobacco farmers, workers and small retailers across the country.
In a letter to Finance Minister Nirmala Sitharaman and Commerce and Industry Minister Piyush Goyal, Tobacco Board Chairman Yashwanth Kumar Chidipothu said the excise duty increase notified on December 31, 2025, has resulted in an effective price rise of nearly 60 per cent in real terms, causing widespread distress across the tobacco value chain.
According to the Board, Flue-Cured Virginia (FCV) tobacco farmers have raised serious concern that the sharp tax hike will lead to a significant reduction in procurement by the legal cigarette industry, the primary domestic buyer of FCV tobacco. This, the Board said, could depress market prices below the cost of cultivation, estimated at around Rs 200 per kilogram, pushing farmers into deep financial distress.
The Chairman noted that farmers in several regions have already begun staging protests and submitting representations to their Members of Parliament. Drawing on experience, he pointed out that a 22 per cent tax increase in 2014 led to a price decline of Rs 20–30 per kilogram.
With higher input costs and a global surplus of tobacco, prices could now fall by Rs 60–70 per kilogram, further aggravating farmer debt. The Board also warned that steep tax and price differentials could accelerate the growth of the illicit cigarette market. Cigarette prices in India could rise to around Rs 400 per pack, compared with Rs 75–80 in neighbouring countries, creating strong incentives for smuggling. Currently, about 26 per cent of India’s cigarette market is estimated to be illegal, making it the fourth-largest illicit cigarette market globally.
Such an expansion, the Board said, would reduce government revenues, weaken legitimate businesses, and shift value chain benefits to foreign producers, potentially resulting in a loss of nearly 40 million man-days of employment. Illicit products also bypass health regulations and are increasingly linked to organised criminal networks and money laundering.
Citing international examples, the Chairman referred to South Africa, where illicit cigarettes are estimated to account for 60–75 per cent of the market, leading to the announced closure of British American Tobacco’s only manufacturing plant in the country by the end of 2026. He also said that in Australia authorities intensified enforcement in 2025, seized more than 16 million illicit cigarettes and shut down dozens of retail outlets amid concerns over organised crime.
The Tobacco Board said that addressing the issue requires a balanced and enforceable tax policy, along with stronger enforcement, effective track-and-trace mechanisms and coordinated regulatory oversight. It stressed that the issue extends beyond revenue considerations and has wider implications for farmer livelihoods, employment, public health and law enforcement. Allahabad HC gives interim relief of stay on FIR against UP police officer Anuj Choudhury in Sambhal violence case.
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