The rationale behind these strategic interventions lies in the economic significance of tobacco. India is the second-largest exporter of unmanufactured tobacco after Brazil, which contributes a large amount of foreign exchange to the exchequer.

Tobacco Exports

Tobacco exports steadily increased from ₹6,408.15 crore in 2019-20 to ₹12,005.89 crore in 2023-24.

As tobacco exports generate significant revenue, the government has adopted structured interventions, including crop planning and production regulation. It has also set in place quality control mechanisms to meet international standards.

Crop Diversification Programme (CDP)

At the same time, the government has also been encouraging farmers to transition from tobacco cultivation through the Crop Diversification Programme (CDP), in accordance with the country's broader public health commitments and efforts to reduce dependence on tobacco cultivation. This is also in line with India’s commitment as a signatory to the World Health Organization's (WHO) Framework Convention on Tobacco Control (FCTC).

As a result, the government has brought tobacco and all tobacco products under 40% tax, significantly lower than the 75% tax rate recommended by WHO.

Addressing Parliament, Minister of Agriculture and Farmers' Welfare Shivraj Singh Chouhan said that between 2021–22 and 2025–26, a total of 31,934 hectares of land were diverted from tobacco cultivation to alternative crops, supported by an allocation of ₹48.67 crore. In Karnataka, diversion increased from 379 hectares in 2021–22 to 2,126 hectares in 2025–26, indicating a gradual but limited shift.

Tobacco Farming

Around six million farmers are directly engaged in tobacco farming in India, while nearly 45 million people, including labourers, processors, and traders, indirectly depend on it.

In states such as Karnataka, Gujarat, Andhra Pradesh, Madhya Pradesh, and Uttar Pradesh, tobacco cultivation is deeply embedded in local agricultural systems, supported by favourable climatic conditions, including well-drained, sandy soils, and established markets.

We are being asked by the government authorities to reduce our tobacco production and switch to other crops. But for us, that would mean a big loss in livelihood as the margins are much higher

– Dayanand Patil, a farmers’ leader from Karnataka’s Kalaburagi

Tobacco offers structured marketing systems, including auctions and export linkages, ensuring better price realisation and lower income volatility. P.S. Murali Babu, president, the Federation of All India Farmers' Associations (FAIFA), told The Secretariat that the average net returns from Flue-Cured Virginia (FCV) tobacco are around ₹90,000 per hectare, with only 12% income volatility.

In comparison, crops such as maize, pulses, paddy, and cotton generate 30%–75% lower returns and come with significantly higher risks.

According to a recent report, Alternative Cropping Systems to FCV Tobacco Cultivation in India, tobacco remains far more profitable than most alternative crops.

Alternative Crops

The government has been promoting alternatives such as cereals, millets, pulses, oilseeds, and horticultural crops, including mango, banana, ginger, and turmeric. However, these alternatives often lack the same level of market assurance and profitability.

Field studies (2025–26) show farmers earning ₹30,000 per hectare from tobacco, compared to ₹6,000–₹14,000 from crops such as paddy and pulses, which is about 2–3 times lower.

Chirag Jain, Partner and Agri and Allied Sector Leader, Grant Thornton Bharat, said that tobacco cultivation is driven by structural risk advantages rather than just higher returns. Farmers benefit from assured market access through organised auctions, relatively transparent pricing, and a well-developed ecosystem of buyers, credit, and post-harvest infrastructure.

Agricultural economist Ashok Gulati pointed out that if alternative crops fail to offer viable returns, “the government should reconsider or even stop such diversification programmes, as farmers cannot be expected to shift away from a crop that ensures their livelihood.”

A farmers-first diversification model demands sustained investment in alternatives before expecting farmers to abandon a crop that feeds their families

– P.S. Murali Babu, president, Federation of All India Farmers' Associations (FAIFA)

The slow pace of diversification, coupled with farmers’ resistance, underscores a fundamental gap between policy intent and farm-level economics. Until alternative crops can provide comparable returns, stability, and assured market access, tobacco is likely to remain central to farmers’ livelihood strategies.