Andhra Pradesh Chief Minister N Chandrababu Naidu has ordered tobacco companies to resume purchases immediately as farmers struggle with a mounting surplus of unsold inventory, according to a statement from the Chief Minister’s Office. The state government is enforcing a Minimum Support Price (MSP) of ₹200 per kg, and Naidu warned that inadequate support could drive farmers toward alternative crops, threatening long-term tobacco production in the region.
Supply-Demand Mismatch
The scale of the crisis is underscored by a sharp disparity between company commitments and actual farmer output. According to the Chief Minister’s Office statement, companies had submitted indents for 95.50 million kg of tobacco, but farmers produced 142 million kg — a surplus of nearly 46.5 million kg. This imbalance has left a significant portion of the crop unsold, pressuring prices below the MSP level.
| Metric | Volume |
|---|---|
| Company indents | 95.50 million kg |
| Farmer production | 142 million kg |
| Unsold surplus | ~46.5 million kg |
Company Commitments and Criticism
Naidu expressed dissatisfaction with the Tobacco Board’s performance, noting that while Karnataka’s flue-cured Virginia (FCV) tobacco market remained stable, Andhra Pradesh faced a significant procurement gap. He specifically criticised the slow pace of major manufacturers, naming ITC Ltd, Godfrey Phillips India Ltd, and VST Industries. Reviewing commitments of 28 companies that had submitted indents, he warned that those failing to honour their obligations would face consequences.
Trade representatives explained that the crisis stems from cultivation exceeding market demand, compounded by declining exports. Despite these headwinds, they assured the Chief Minister that procurement would continue to address the oversupply, although they noted that purchases had already exceeded their actual requirements.
Export Headwinds and Market Structure
Officials informed the Chief Minister that the absence of an open market for tobacco had aggravated the problem. With exports declining, domestic companies are the primary off-takers, which limits farmers’ ability to find alternative buyers. The companies’ representatives said that declining exports had further affected procurement, making it difficult to absorb the full harvest.
Outlook
Naidu’s directive carries immediate implications for tobacco procurement across Andhra Pradesh, a key producing region. The forced resumption of buying at MSP levels may temporarily stabilise farmer incomes, but the underlying supply-demand imbalance — 142 million kg produced against 95.5 million kg indented — suggests continued price weakness unless export markets recover or acreage is reduced for the next season. The Tobacco Board’s role will be closely watched, especially in contrast with Karnataka’s stable market conditions. For commodity traders and processors, the next key date is the progress of purchases over the coming weeks, as company compliance with the Chief Minister’s order will determine how much of the surplus is cleared.
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