THE TOBACCO SURPLUS

 

India exports tobacco worth thousands of crores. Why are Andhra Pradesh’s farmers struggling to sell their crop?

By Murthy ASR  |  Biz Masala  |  17 October 2026

Tobacco cultivation is the starting point of a value chain shaped by crop controls, auction prices and export demand.

A crop that outgrew its market

India’s tobacco business is an important export industry. Yet Andhra Pradesh’s 2025–26 Flue-Cured Virginia (FCV) tobacco season has exposed a basic vulnerability: the crop authorised by the regulator and the crop estimated to have been produced diverged sharply. The result was a market weighed down by excess leaf, lower average auction prices and reported unsold stocks.

The Tobacco Board fixed Andhra Pradesh’s authorised FCV crop size at 142 million kg for 2025–26. On 4 September 2026, the state Agriculture Minister said actual production was estimated at about 236 million kg—roughly 94 million kg above the authorised quantity. That is an estimated 66% overshoot. These are reported estimates, not a final audited production account. [1][2]

The arithmetic is stark. A regulated crop plan was overtaken by production estimated to be about two-thirds larger. The numbers do not, on their own, tell us why every farmer planted more or whether the Board could have forecast the outcome. They do establish the central question for this investigation: how did the gap become so large, and who paid for it?

Prices fell as surplus pressed on auctions

Tobacco bales at market: a visible stock position does not by itself reveal final prices or farmers’ net returns.

As of 4 September, 86.59 million kg had been marketed over 132 auction days, and the reported average price was ₹209.83 per kg. The previous season’s final average was ₹248.86 per kg—a decline of about 16%. The comparison is indicative rather than a calculation of each farmer’s loss: grade, quality, costs, yields and sale timing all matter. [2][3]

Government statements later reported improving buyer competition and fewer no-bid lots. That is a positive market signal, but it does not prove that the surplus had been cleared or that all farmers obtained remunerative prices. The latest complete disposition of the excess crop—and the final season-wide average price—remain crucial missing pieces.

September relief: permission to sell is not a price guarantee

On 24 September 2026, the Union government relaxed restrictions under the Tobacco Board Act for the 2025–26 Andhra Pradesh season, allowing excess FCV tobacco from registered growers and unauthorised tobacco from unregistered growers to be sold through Tobacco Board-authorised auction platforms. The move followed protests by growers seeking a route to market their surplus. [4][5]

Reporting on 26 September said farmers still held around 65 million kg of stocks, while about 80 million kg had been purchased through 11 auction platforms. These figures were a snapshot reported at that time, not a current inventory. The same report estimated production at around 100 million kg above the permitted quantity, a slightly different estimate from the 236-million-kg figure reported earlier in September. The variation is a reason to seek the Board’s final figures rather than select one estimate as definitive. [4]

The Centre also waived additional service charges and penalties on excess FCV tobacco, with relief reported at about ₹226 crore. Separately, it approved a one-time interest-free working-capital loan of ₹50,000 per barn for FCV growers. A loan can ease immediate cash-flow pressure, but it is not a grant and does not replace the need for viable farm returns. The key questions are how much assistance reached growers, under what repayment terms, and how much tobacco was eventually sold. [6][7]

The export paradox

India’s export strength must be separated from the price realised by growers.

Financial year	FCV tobacco exports	Export value
2023–24	143,317 tonnes	₹5,932 crore
2024–25	146,954 tonnes	₹7,571 crore

Export value rose about 28% while export volume rose about 3%. Export receipts are not the same as farm-gate income.

The export story is stronger than the farm-market story. According to the Tobacco Board’s 2024–25 Annual Report, India exported 146,954 metric tonnes of FCV tobacco valued at ₹7,571 crore in 2024–25, compared with 143,317 tonnes valued at ₹5,932 crore in 2023–24. That was a 28% rise in rupee value in 2024–25, against a 3% rise in quantity. [8]

Those figures show the value of the export business, but they cannot be read as proof that growers received a matching increase. Export values reflect the mix of grades and products, exchange rates, contract timing and costs across the chain. The proper comparison is not export value against an auction average alone; it is a documented account of farm-gate realisation, costs, margins and the time lag between purchase and export.

Early official Tobacco Board data for April–June 2026 show ₹2,448 crore in FCV tobacco exports. That is a three-month figure and should not be extrapolated into a full-year estimate. [9]

A sharp crop cut is proposed for 2026–27

Growers’ outcomes depend on the quantity marketed, grade, costs and realised auction price.

Curing is a cost-bearing stage of FCV production; energy, labour and barn expenses affect the grower’s net return.

In July and September reporting, the state Agriculture Minister said growers would be encouraged to limit production to about 81 million kg in 2026–27, down from the 142-million-kg authorised crop size in 2025–26. The Board’s current registration criteria and final implementation data need to be checked before describing 81 million kg as the completed or final registered crop. [3][10]

Reducing supply may help restore balance if the target is based on credible demand and stock estimates. But it creates a difficult coordination problem: individual growers may fear losing income if they cut planting while others continue to produce. The Board says its production policy considers manufacturers’ and exporters’ requirements, global supply and carryover stocks, and that crop regulation is intended to align supply with domestic and international demand. [11]

What the evidence does—and does not—show

The evidence supports a strong finding of a major production mismatch, price pressure and government intervention to move excess crop through authorised auctions. It does not yet establish who was responsible for the overshoot, the final quantity left unsold, the net loss per farmer, or whether relief measures fully reached the intended growers.

Those distinctions matter. This story should not accuse officials, growers or buyers of deliberate wrongdoing without documentary evidence. It should reconstruct decisions and incentives: the Board’s crop-size calculations; growers’ registration and planting decisions; manufacturers’ procurement requirements; auction outcomes by centre and grade; and the actual clearance of the surplus.

The questions that matter now

How much FCV tobacco was finally produced in Andhra Pradesh in 2025–26, and how much was sold through auctions after the September relaxation?

What were the final average prices by auction centre and grade, and how many bales remained unsold at season close?

What demand forecasts and carryover-stock estimates did the Tobacco Board use when fixing the 142-million-kg target?

How many growers and barns received the ₹50,000 interest-free working-capital loan, and what are the repayment conditions?

Has the 81-million-kg target for 2026–27 been translated into final registration and enforceable production limits?

What do representative farm budgets show after labour, inputs, curing fuel, transport, interest and unpaid family labour are counted?

Did export growth in 2025–26 continue, and how much of the value reached growers rather than being retained elsewhere in the value chain?

Biz Masala assessment

Andhra Pradesh’s tobacco problem is not simply that prices fell in one season. It is that a tightly regulated export crop appears to have produced far more than its authorised quantity, leaving the government to relax rules and provide financial relief after the surplus had already reached the market. The sector’s export strength and the grower’s financial security are related—but they are not the same thing.

The decisive test is whether the system can publish credible demand and stock estimates, keep production closer to market requirements, clear the 2025–26 surplus transparently and demonstrate that growers’ net returns are viable. Until the final auction and stock data are available, the most defensible conclusion is that emergency measures opened a route to market; they have not yet proved that the underlying imbalance has been resolved.

Sources and reporting notes

[1] Tobacco Board, Andhra Pradesh 2025–26 crop-size circular (142 million kg): https://tobaccoboard.commerce.gov.in/tbdata/circularfiles/cir1012025-26-AP-Regcir.pdf

[2] Akashvani News, 6 September 2026, minister’s reported production, marketed quantity and auction average: https://newsonair.gov.in/tobacco-market-situation-improving-in-andhra-pradesh-agri-minister-atchannaidu/

[3] The New Indian Express, 7 September 2026, market and proposed crop target: https://www.newindianexpress.com/states/andhra-pradesh/2026/Sep/07/tobacco-market-improves-as-competition-picks-up-in-andhra-pradesh

[4] The New Indian Express, 26 September 2026, excess-sale permission and stocks reported at that date: https://www.newindianexpress.com/states/andhra-pradesh/2026/Sep/26/centre-permits-sale-of-excess-fcv-tobacco

[5] Government notification S.O. 5262(E), 24 September 2026, reproduced by Gazette Tracker: https://gazettetracker.com/g/CG-DL-E-25092026-276486

[6] Times of India, 25 September 2026, reported ₹226 crore relief from waived charges: https://timesofindia.indiatimes.com/articleshow/134489690.cms

[7] PIB, 25 September 2026, interest-free loan of ₹50,000 per barn: https://www.pib.gov.in/PressReleaseIframePage.aspx?PRID=2315004&lang=2&reg=48

[8] Tobacco Board Annual Report 2024–25, FCV export quantities and values: https://tobaccoboard.commerce.gov.in/tbdata/publicationsfiles/TOBACCO_BOARD_A.R._2024-25_English_Book.pdf

[9] Tobacco Board export performance, April–June 2026: https://www.tobaccoboard.commerce.gov.in/export_per.php

[10] Akashvani News, 17 July 2026, proposed 81-million-kg target: https://newsonair.gov.in/andhra-pradesh-agriculture-minister-kinjarapu-atchannaidu-reviews-the-progress-of-fcv-tobacco-procurement/

[11] Tobacco Board production policy: https://www.tobaccoboard.commerce.gov.in/propolicy.php

Editorial note: This is an evidence-led business story about the economics of tobacco cultivation and marketing. It does not endorse tobacco consumption. Production figures for 2025–26 are estimates reported by public authorities/media unless otherwise stated; final Board data and current auction clearance should be obtained before publication.

BIZ MASALA

Business. Markets. People. Insight.

Business. Markets. People. Insight.

 

Business. Markets. People. Insight.