Andhra Pradesh Chief Minister N. Chandrababu Naidu has urged the Union Government to reconsider the enhanced taxation on cigarettes introduced this year, warning that the move has had adverse consequences for tobacco growers in the State. In separate letters to Union Finance Minister Nirmala Sitharaman and Commerce and Industry Minister Piyush Goyal, Mr Naidu highlighted a sharp downturn in prices and procurement for Flue‑Cured Virginia tobacco following the revised tax regime effective from 1 February 2026.
Tax changes and the claimed impact
In his correspondence, the Chief Minister noted that the Goods and Services Tax on cigarettes was raised from 28% to 40%, while excise duty was increased significantly by category and length. The letters said excise duty on cigarettes has risen from ₹2,050 to ₹8,500 per 1,000 cigarettes. Mr Naidu argued that the combined effect of GST, higher excise duty and the National Calamity Contingent Duty has produced a 'tax‑on‑tax' burden that discouraged purchases and compressed market demand.
According to the Chief Minister, the slowdown in buying by cigarette manufacturers has been reflected in auction prices for tobacco. He said the opening auction rate, which was around ₹280 per kg last year, had dropped to about ₹250 per kg this year. Reduced procurement quantities by companies, he added, are causing losses to farmers who cultivate Flue‑Cured Virginia tobacco.
| Item | Earlier | Revised / Current |
|---|---|---|
| GST on cigarettes | 28% | 40% |
| Excise duty (per 1,000 cigarettes) | ₹2,050 | ₹8,500 |
| Opening auction price of tobacco | ₹280/kg (last year) | ₹250/kg (this year) |
Farmers and exporters affected
Mr Naidu said the tax revisions have prompted cigarette manufacturers to cut down on procurement volumes, directly affecting growers of Flue‑Cured Virginia tobacco in Andhra Pradesh. The Chief Minister also drew attention to challenges faced by exporters, attributing difficulties to prevailing geopolitical conditions at the international level, which have compounded the domestic demand slump.
He described the situation as a cumulative "tax‑on‑tax" burden that has slowed market purchases and led to a sharp fall in tobacco prices.
The letters request that the Centre review the enhanced tax structure and excise duty policy to protect farmers' interests and help stabilise the market. No specific remedial measures were detailed in the publicly available summary of the letters, beyond the appeal for a policy review.
Context and likely implications
Tobacco cultivation, particularly Flue‑Cured Virginia, is a cash crop for a section of farmers in Andhra Pradesh. Changes in demand from domestic manufacturers and export markets can promptly affect auction prices and incomes. The Chief Minister's appeal places the issue on the national policy agenda and seeks a re‑examination of the balance between public revenue from tobacco taxation and livelihood impacts on cultivators.
If the Centre takes up a review, possible outcomes could range from adjustments in duty structure, phased implementation, targeted relief for growers, or standing by the higher tax as part of public health and revenue objectives. The letters were addressed to the Finance and Commerce Ministers; any change would require Central Government consideration and, for tax rates, formal notification.
The Chief Minister's initiative signals a push by the State to secure immediate attention to what it describes as urgent economic distress in an agricultural segment. The publicly available account does not include responses from the Union Ministers or from cigarette manufacturers and exporters.
As the matter develops, stakeholders likely to monitor outcomes include tobacco farmers' associations, auction platforms, cigarette manufacturers, exporters and tax policy analysts, all of whom would be affected by any alteration to the current tax framework.
