FAIFA warns steep tobacco excise hikes will hurt farmers, raise prices, and push consumers toward illegal cigarettes in India.

In order to discourage smuggling and promote domestic farming, the Federation of All India Farmer Associations (FAIFA) called on the government on Friday to reverse the published tobacco product excise rates and change them to revenue-neutral rates.

In a statement, FAIFA stated that maintaining farmer incomes, safeguarding jobs along the value chain, and coordinating economic policy with long-term public health objectives all depend on a stable tax system.

With effect from February 1, the Ministry of Finance’s “Chewing Tobacco, Jarda Scented Tobacco and Gutkha Packing Machines (Capacity Determination and Collection of Duty) Rules, 2026” announcement imposes an excise charge of between Rs 2,050 and Rs 8,500 per 1,000 sticks, depending on cigarette length.

According to FAIFA, such a significant tax increase would compel domestic producers to raise the cost of their final products, which would reduce sales and negatively impact farmers’ supplies. In the near future, this might lead to an oversupply in the market for tobacco crops, it continued.

“The government promised that in the case of tobacco products, GST would be charged at 40% of the retail sales price, while the overall incidence of tax would remain unchanged,” stated FAIFA President Murali Babu when he announced GST 2.0 on September 4, 2025.

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He went on to say that the Indian farming community has been clinging to this guarantee of income neutrality and has applauded the government’s decision to rationalize GST by reorganizing rates and eliminating the 12% slab, which has helped lower prices.

FAIFA officials made an appeal to the government, emphasizing that the World Health Organization’s (WHO) affordability index shows that India’s legal cigarette prices are already among the most expensive in the world when compared to per capita income.

It contended that the current sharp increase will make legal products unaffordable for a large portion of consumers, hastening their migration to illegal channels. FAIFA urged the government to make sure that tax laws don’t penalize people who have always followed the law.