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GIST

Exchange Control (Tobacco Finance) (Amendment) Order, 2026 (No. 2)

Tobacco buyers may now fund purchases from local as well as offshore money, and the foreign currency surrender requirement applies to their net — not gross — export proceeds.

The Exchange Control (Tobacco Finance) Order, 2004 gets the same treatment as the cotton order gazetted alongside it. Tobacco buyers may access both offshore and onshore funds to purchase tobacco, and the order declares that they may use their own savings of any kind, or borrow or raise funds locally, to finance the production and buyback of green leaf tobacco.

The change with the clearest financial effect is on surrender. A tobacco buyer who accesses funding for tobacco purchases is deemed an exporter, and the foreign currency surrender requirement advised by the Reserve Bank from time to time applies to the net rather than the gross export proceeds realised from selling exported tobacco. Surrendering on net proceeds is a materially smaller obligation than surrendering on gross.

"Contract tobacco" is simplified to mean tobacco whose production has been financed by a contractor, and the definitions of "interbank market" and "Memorandum of Deposit Scheme" fall away. Where a contractor has financed an A1 or A2 grower, the amount advanced may be set off against the price of the tobacco the grower sells to that contractor.

The heading and wording of section 7 are cleaned up to remove the assumption that financing comes from offshore, and two subsections of section 5 are repealed. The order does not state a commencement date beyond its gazetting on 6 February 2026.

What changed

  • Tobacco buyers may access both offshore and onshore funds to purchase tobacco
  • Buyers may use own savings or borrow locally to finance production and buyback of green leaf tobacco
  • A funded tobacco buyer is deemed an exporter and the surrender requirement applies to net, not gross, export proceeds
  • 'Contract tobacco' redefined as tobacco whose production has been financed by a contractor
  • Definitions of 'interbank market' and 'Memorandum of Deposit Scheme' repealed
  • Contractor financing of A1 and A2 growers may be set off against the price of tobacco sold to the contractor
  • Section 7 reworded to drop the offshore-only assumption; section 5(5)(a) and (b) repealed

Who this affects

  • tobacco merchants and buyers
  • contractors financing A1 and A2 tobacco growers
  • tobacco growers under contract
  • banks financing the tobacco season
  • exchange control and treasury teams handling surrender requirements

Plain-language summary — not legal advice. Always read the full instrument.