Tue, Sep 14, 2004 - Page 10 News List

Tobacco growers want compensation

PROCUREMENT Farmers yesterday petitioned the government to increase purchases of tobacco to compensate for investments they have made

By Amber Chung  /  STAFF REPORTER

Tobacco farmers protest outside the Ministry of Finance yesterday calling for the government to maintain the Taiwan Tobacco and Liquor Corporation's buyout of locally produced tobacco and amend its policy to gradually reduce government procurement of their crop.


Over 1,000 of the nation's tobacco growers yesterday petitioned for a raise in this year's government purchase volume of domestic tobacco, to compensate for investments they have already made.

"The nation's tobacco growers have poured money into necessary investment, such as soil preparation, for the more than 2,100 hectares of [tobacco] farmland across the country," Chen Man-hsiang (陳滿祥), representative of a local tobacco growers' association, told the Taipei Times in a telphone interview.

The growers hope the Executive Yuan will increase the buying volume of locally-grown tobacco leaves for this year from the previously agreed half of the output to 70 percent to make up for their investment, Chen said.

Tobacco farmers also hope the government will shorten its proposed three-year purchasing scheme to two years, as revenues from reduced production in the third year would not be even enough to cover the reaping costs, Chen said.

Switch crops

The Cabinet decided last month to continue buying locally-grown tobacco leaves and lowering the purchase volume over the next three years. The Cabinet also instructed the Council of Agriculture to help the tobacco growers switch from tobacco to other crops.

According to the government's plan, this year it will purchase about 274.5 million kilograms, or roughly half the volume it bought last year. Next year, the government will buy 20 percent less in volume than this year's amount, with the same reduction in 2006.

Extra expenses

The state-run Taiwan Tobacco and Liquor Corp (TTL, 台灣菸酒公司), which has been instructed to buy the tobacco, said it has no choice but to obey the policy.

"[The policy makes] us incur an extra NT$400 million of inefficient expenses, at the same time as we're working to improve our spending efficiency, which has provoked resistance from employees," said TTL Chairman Morgan Hwang (黃營杉).

TTL's extra expenses won't deter it from its privatization process. By the end of next year the company expects that less than 50 percent of its shares will be government-owned. The extra expenses for purchasing could continue indefinitely, though, as the government will likely remain a large shareholder, Hwang said.

Hwang admitted that this could have a negative impact on the company's plan to get strategic investment from foreign-owned tobacco companies, and could decrease the company's share price.

The former tobacco and liquor monopoly has up to 20 million kilograms of tobacco inventory in the warehouse, which may not be consumed in the next five years, adding to the company's extra storage and manpower expenses, Hwang said.

TTL reported a pretax profit of NT$6.8 billion between January and last month and expects to create NT$10 billion this year, up 20 percent from last year, according to the company.

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