Just three weeks into auction, tobacco prices in Karnataka have scaled fresh peaks at about Rs 113 a kg, defying the ongoing economic slowdown.
"The prices at the on-going Karnataka auctions are now ruling at an average of Rs 112.69 a kg, compared with the previous record of Rs 109.71 a kg struck during the last auction in the state," a senior official with the Guntur-based Tobacco Board said.
Close to 2 million kg of tobacco has already been auctioned, which started from September 2 in Karnataka. The tobacco auction in the country is mainly undertaken in Karnataka and Andhra Pradesh.
Though the ongoing economic crisis has hit demand in many commodities, tobacco auctions in India- the third-largest exporter of the item, witnessed a record surge in prices due to stagnant global output and a rise in overseas demand.
Even anti-tobacco norms in some countries have not been able to contain the growth in demand absolutely.
"Global tobacco output in the last 4-5 years has been stagnant whereas demand has grown by up to one per cent a year despite anti-tobacco norms in some countries," he said, commenting on reasons for the unprecedented rise in prices.
Moreover, the shrinking crop size in Zimbabwe, which is a major producing country, has exerted more pressure on supply from India and China pushing prices up, he added.
Earlier, prices of tobacco touched an average of Rs 103.39 per kg during auctions in Andhra Pradesh in early 2009 against Rs 84.75 in the previous year. Similarly, prices of
the highest quality tobacco in Andhra Pradesh spiralled to a record Rs 155 a kg against Rs 141 last year.
The state witnessed tobacco auction to the tune of 204 million kg.
Global tobacco production touched 5,500 million kg in 2007-08, out of which the FCV tobacco used for making cigarettes, accounts for 4,170 million kg.
Encouraged by better realisation due to a huge demand overseas, India's tobacco and tobacco products exports surged by 39 per cent to Rs 1,366 crore (Rs 13.66 billion) till July this fiscal.
Image: Tobacco plant
