Committee quashes tobacco quotas
A joint committee of Parliament reviewing the Tobacco Industry Bill has quashed submissions of tobacco growers who wanted auction and contract systems to have a 50:50 market share.
The report of the committee tabled in Parliament yesterday has also recommended abolition of quotas in the market systems.
The bill, which was tabled in June this year before it was referred to the joint committee, repeals the Tobacco Act and the Control of Tobacco Auction Floors Act, consolidating them into one law.
The bill takes into account a new tobacco marketing system, contract farming or integrated production system (IPS), where a buyer contracts to buy from a grower who commits to sell to the contracted buyer.
In the past, only auction system was recognised, but there has been a growing trend towards contract farming, popularly known as IPS, in recent years.
However, the system has come under fire for allegedly not protecting tobacco growers.
Presenting the report to the House, committee chairperson Joseph Chidanti Malunga said the bill would regulate contract farming and fill the gap in the lack of legislation.
He said the committee took into consideration the fact that contract farming would drive to extinction auction marketing.
“The joint committee was of the view that the bill should not provide for any quota. The markets should be left open and the market dynamics should prevail and determine volumes of tobacco to be produced and sold under either system,” Malunga said.
Under contract farming, a grower suffers a lot of deductions many of which they only become aware of when the tobacco is being sold by the buyer.
The committee received submissions that contract farming should be eliminated because it has proved to be less profitable to the grower despite the tobacco being sold at a higher price than the auction system.
“The committee considered the submission and formed the view that the funded contract system should be retained because not all farmers can afford to produce tobacco with their own resources. If it is abolished, growers will be forced to get loans from commercial banks who charge exorbitant interest rates,” said Malunga.
However, the committee has recommended an addition of provisions that would protect growers under contract farming from misinformed deductions and pricing of inputs.
In their consultations, the committee met various stakeholders, including the regulator Tobacco Control Commission, Ministry of Agriculture, Irrigation and Water Development, Tobacco Association of Malawi (Tama), AHL Group and tobacco growers in three districts.
Leader of the House Kondwani Nankhumwa has since deferred debate on the committee report to a later date after which the bill will be brought back to the floor.
