Andhra Pradesh holds a significant position in the global tobacco industry, particularly with its Flue-Cured Virginia (FCV) regions in Prakasam, Nellore, and Guntur, maintaining its status as India’s leading tobacco state for several decades. However, the region is currently facing critical challenges, including a domestic market crisis, rising international competition, and the urgent necessity to redefine its role within the global value chain. In comparison to global leaders, Brazil has established itself at the forefront of the tobacco market due to early investments in barn modernization, traceability, and quality, enabling farmers to earn 15–20% above the global average.
Zimbabwe successfully recovered from a previous decline by diversifying its buyer base and implementing state-supported pricing strategies, while Malawi has focused on specific grades and traceability for European markets. Andhra Pradesh competes on scale and quality, exporting FCV valued at over ₹12,000 crore annually. However, it is overly reliant on a limited buyer pool, with more than half of its exports directed to Belgium, the Philippines, and Indonesia, and 60% to the EU, where tightening sustainability and traceability standards present increasing challenges. G. Konda (Siva) Reddy, President of the Tobacco Growers Association in Kandukur, expressed concerns about overproduction in the region. Farmers have been cultivating beyond market capacity, prompting traders to lower prices by citing an excess supply.
Reddy noted the misleading information provided by traders, who initially claim an abundance of stock only to later suggest a shortage, delaying serious purchases until mid-year. Despite being among the top global producers of FCV tobacco, recognized for its scale and quality, Andhra Pradesh faces vulnerabilities due to outdated barns and limited processing capabilities. Prices for tobacco have surged recently, from ₹120 per kilo in 2019 to over ₹260 today, but the recent decline in HD Burley prices and the reliance on a small number of buyers underscore the need for improvement.
There are still potential opportunities for growth, such as barn modernization, which could increase earnings by ₹20–30 per kilo, and compliance with EU standards could help secure a quarter of its exports. Enhancements in export-grade processing and packaging could further boost earnings by ₹15–20 per kilo. Forming strategic partnerships and attracting foreign investment would enable modern curing, improved traceability, and broader market access, positioning Andhra as a premium, compliance-ready hub. The decline in HD Burley prices is not merely a temporary issue but a critical warning. Andhra Pradesh must abandon a volume-focused strategy that exacerbates losses during downturns and transition toward a value-oriented approach akin to the strategies implemented by Brazil and Zimbabwe in their critical periods.
A targeted infrastructure investment of ₹1,000 crore, supported by both state and domestic funds, could potentially raise earnings by 20 to 25% per kilo and shield the region from global price volatility. Ultimately, this transformation could position Andhra Pradesh as a certified premium supplier within the global tobacco supply chain, transitioning from a bulk supplier to a vital partner for international markets. Moving forward, the tobacco economy in Andhra Pradesh stands at a crucial crossroads. Competing with the likes of Brazil, Zimbabwe, and Malawi will require more than just high production volumes; it demands a clear vision. This vision must focus on ensuring farmer security, adhering to global compliance standards, enhancing infrastructure, and diversifying market access.
The path is evident: either continue to risk price collapses similar to those affecting HD Burley, or evolve into a premium entity capable of achieving stability and recognition within the international supply chain. The window for action is narrow, but if seized, Andhra could solidify its position among the world’s leading tobacco producers for years to come.
