Market will now determine tobacco prices
China has announced that procurement prices for tobacco leaves will now be set by supply and demand, in a country where one-third of the world’s cigarettes are consumed but where sales of high-end cigarettes have dropped during the recent corruption crackdown.
Tobacco companies are now allowed to independently set procurement prices on tobacco leaves based on companies’ revenues and demands, instead of purchasing the leaves at prices set by the government, according to a government statement.
“Tobacco companies have formed long-term common interests with tobacco farmers, and it will be more reasonable to allow them to set prices,” said Wang Shengmin, an official of the NDRC’s price department.
Annual production of leaf tobacco in China is around 2.5 million metric tons per year, with a total value of less than 100 billion yuan ($16.1 billion), he said.
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