Cabinet may soon consider complete FDI ban in tobacco sector

As per the proposal, the ministry has proposed to ban FDI in licensing for franchisee, trademark, brand name and management contracts in the sector, say people aware of the development


The ban would also eliminate the possibility of indirect flow of overseas funds to the sector. Photo: Reuters
The ban would also eliminate the possibility of indirect flow of overseas funds to the sector. Photo: Reuters

New Delhi: The Union Cabinet is likely to soon consider a proposal to completely ban foreign direct investment (FDI) in the tobacco sector.

Government has been working on this proposal after tightening norms regarding pictorial warnings on cigarette packets. The commerce and industry ministry has forwarded the final cabinet note for the Cabinet’s consideration, people familiar with the matter told PTI.

“Views of all the concerned ministries, including health and finance ministry was included in the note,” they said.

Currently, FDI is permitted in technology collaboration in any form, including licensing for franchise, trademark, brand name and management contracts in the tobacco sector. However, it is prohibited in manufacturing of cigars, cigarettes of tobacco and tobacco substitutes.

The proposal, if approved, may be a setback for domestic cigarette manufacturers. As per the proposal, the ministry has proposed to ban FDI in licensing for franchisee, trademark, brand name and management contracts in the sector, people aware of the development said.

It would mean FDI would be totally banned in the tobacco segment in any form. The ban would also eliminate the possibility of indirect flow of overseas funds to the sector. The move also assumes significance as India is signatory to the Framework Convention on Tobacco Control, under which the country has the responsibility of reducing consumption of tobacco products.

Under new norms introduced by the government, tobacco products would have to carry larger pictorial warnings covering 85% of the packaging space. Cigarette manufacturers, including Godfrey Phillips, had raised serious concerns over this move. FDI into the country grew by 29% to $40 billion in 2015-16.

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