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Billions in tobacco taxes uncertain PDF Print E-mail
Tuesday, 30 September 2008

Agency

A government decision to deny subsidised Urea fertiliser to tobacco farmers could result in chaos descending on the country's premier cash-crop tobacco, industry leaders say.

"There could be larger repercussions on the industry as a whole and the hefty Tk 4200 crore Supplementary Duty and VAT generated by the end-product," said Nasir Uddin Biswas, chairman of Bangladesh Cigarette Manufacturers Association (BCMA).
 
"The crop has fast clawed a sizeable export market of US$ 31 million," he
points out.
 
"Almost all of this has been generated by farmers in Rangpur, resulting in a much lesser impact of the Monga situation there. The Rangpur crop of Burley tobacco is exclusively for export."
 
The agriculture ministry heard the tobacco farmers' case on Sept 10 in a meeting with cigarette manufacturers but refused to accept the arguments, citing social pressures.
 
The ministry obviously kept in mind the cost of healthcare because of the tobacco–related diseases.
 
Agriculture secretary Md Abdul Aziz referred to the state policy of discouraging use of tobacco.
"We are giving tobacco farmers at import cost," the secretary said to bdnwes24.com. "They are paying Tk 70 for a kilogram of urea whereas the other farmers get it for Tk 12."
 
Aziz said the economic benefits far outweighed the pressures to discourage the crop.
 
But the BCMA chief finds the government's decision "difficult to comprehend".
 
"It has approved factory-cost urea for the tea industry which has an export basket of US$ 11 million," he reasons.
 
According to figures available from the Agriculture Extension Department, the overall production of tobacco in the country has, in fact, dropped to 2003-04 levels as a whole, a fact that flies in the face of allegations that tobacco crops are being grown at the cost of food crop.
 
In addition, it would suggest that the government's tobacco control measures are working well, said Mahmudur Rahman, a former British American Tobacco official.
 
The crop is grown on roughly 61,000 hectares of land and takes up a mere 0.7% of the country's arable land.
 
More than 200, 000 farmers and 10 million labourers are engaged in producing the crop – the value of which is around Tk 650 crore and that provides wages in the range of Tk 117 crore – all within a span of three months from December to February.
 
"Tobacco is the only crop where the farmers sell direct to the companies without the curse of the middle-man hanging over them," Rahman said.
 
"As a result, farmers are able to run around their crop proceeds quickly in preparation for the next crop."
 
According to industry sources, the bulk of the country's tobacco is grown along the river beds of the Matamuhuri river in Chittagong and the Teesta in Rangpur. No other food crop can grow in this sandy soil, they say.
 
Kushtia and Manikganj has tobacco growing on high land but a lack of irrigation prevents cultivation of food crops there.
 
Further, the stagnant water required for food crop cultivation would seriously jeopardise the stability of Kushtia's water table, if indeed all available land was utilised for the purpose.
 
"The decision is both discriminatory and unfair," Rahman says of the government refusal to "help" tobacco farmers.
 
"Food grain farmers will get their Urea at Tk 10,000 per metric tonne. Tobacco farmers will have to buy the same fertiliser at Tk 65,000 – a 650 percent mark-up."
 
The tea industry, says a BCIC official, has been given a special subsidy of Tk 12,000 per
tonne.
 
"Farmers are now apprehensive whether at all they can plant their crop," according to Rahman.

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