Tobacco Asia

Volume 20, Number 1

Issue link:

Contents of this Issue


Page 19 of 75

20 tobaccoasia / Issue 1, 2016 March / April) TTM and Farmers In a proactive move addressing a dispute with Thai tobacco farmers as well as trying to foster better understanding by the farmers and the tobacco industry as a whole, Dr. Suttiniphapunt revealed that in previous years TTM, who practices contract farming with about 17,000 tobacco growers in Thailand, has had to buy leaf that the farmers grew in excess of their quotas but TTM will not be continuing doing so any longer. "TTM enters contract farming because tobacco farming in Thailand can only be done with permission from the Excise Department," she said. "In the past farmers have tended to grow more than the quota they were allowed and TTM was forced to buy the excess amount of tobacco leaves as well, even though it exceeded the amount TTM needed to produce its cigarettes. "We aren't trying to take advantage of our farmers, but simply trying to find a way where we can all move forward together and mutually benefit. We can't buy excess leaf that exceeds our production demand, and we can't buy excess leaf from last year as the quality would have de- creased without the leaf being properly stored." TTM had previously announced that start- ing from the 2015/2016 crop it would no longer be buying leaf that were in excess of the quotas allocated to each farmer, causing much displea- sure from the farmers who threatened to come together and stage a protest. Farmers cur1rently earn THB2.7 billion from leaf sales: THB1.3 billion for Virginia, THB1 billion for Burley, and THB400 million for Turkish leaf. Aside from helping provide technological know-how, teaching famers how to best grow their tobacco leaf, and guaranteeing the buy- ing price, TTM also helps farmers by investing in building silos, warehouses, weirs and dams, even providing scholarships for their children. "Each year we budget hundreds of millions of baht to help take care of our farmers, but at the same time there has also always been a demand that we must increase the level of our help by increasing the buying price. We have always done that, but in 2015 the price was increased by THB26 and this year farmers are demanding THB28. If they were to sell their leaf to a private company, they would get THB90 but then they expect TTM to buy the same leaf for THB26 baht more. That isn't fair to us, either." "We are a state enterprise and will encourage people to abide by the law. We just want people to understand that we aren't buying excess leaf for the right reasons and we cannot just enable people to keep doing the wrong thing." "For the first contract for primary tobacco processing there were four bidding companies, from 11 who had originally expressed interest. Of these four, three companies had some commercial errors in their documents, so our Board decided to cancel this first e-auction and redo it again, seeing that hav- ing only one error-free bidder would not be in the best interests of TTM as there would be no price competition. So, we started a new e-auction with all four companies bidding and are scheduled to start considering the bids soon. This has caused only a two-month delay, so it is still alright." "For the second contract, the dry ice expanded tobacco process (DIET Process), there are only two companies who manufacture this machinery, Airco DIET and Toromont Energy Systems. About 80% of cigarette production factories in the world use Airco's machinery. Only Airco DIET entered the bidding. We checked with Toromont but were told that they were not interested to bid, so there was no reason to do another auction. The bidding price was lower than our cost estimate as well, so we have already signed the contract for this. "As for the contract for ASRS, we faced a similar situation with bidding companies as we did for the four companies bidding for the primary process- ing contract, they also had commercial errors in their documents. Right now we are still deliberating what course of action we will take on this. The remain- ing three contracts are in process, we will be sending out invitations to bid soon. We expect to have all six contracts signed by this September and expect to be able to start gradually installing the machinery in the new facility in 2017 with installation of all new machinery being completed in 2018." Not all the machinery at the facility in Rojana Industrial Park will be brand new. In fact, Dr. Suttiniphapunt estimates that about 60% of the machinery in the new facility will be machines currently being used at TTM's site in Bangkok that will be moved to their new home. Moving the used machines to Rojana will start this year in parallel with regular production schedules so there will be no drop in output. "We are going to be moving about 30 machine sets [from Bangkok to Ro- jana]," said Dr. Suttiniphapunt. "Each set takes about three months to move and install, as they'll need to be overhauled as well. We should have everything installed and ready within 2019, and full production capacity in 2020." "There will be no halt in production even as we move the machines. If one machine is in the process of being moved, there will have to be another machine that can be used instead. We will also use OT to ensure that our production output levels remain the same." Another view of the new TTM facility

Articles in this issue

Archives of this issue

view archives of Tobacco Asia - Volume 20, Number 1