Government likely to completely ban FDI in tobacco sector

New Delhi: After making it mandatory to carry larger pictorial warnings on cigarette packets, the government is now working on a proposal to completely ban foreign direct investment (FDI) in the tobacco sector. At present, FDI is permitted in technology collaboration in any form, including licensing for franchise, trademark, brand name and management contract in the tobacco sector.

However, it is prohibited in manufacturing of cigars, cigarettes of tobacco and tobacco substitutes. According to sources, the Commerce and Industry Ministry is proposing to even ban FDI in licensing for franchise, trademark, brand name and management contract in the sector. It would eventually mean that FDI would be totally banned in tobacco segment in any form.

The ban would eliminate the possibility of indirect flow of overseas funds to the tobacco sector, even through foreign technology collaboration including licensing for franchise, trademark and brand name, they said. The ministry has already circulated a draft Cabinet note to seek views of different departments including health, finance, commerce and Niti Aayog.

The move also assumes significance as India is signatory to the Framework Convention on Tobbaco Control, under which it has the responsibility of reducing consumption of tobacco products. It is now mandatory for all tobacco products to carry larger pictorial warnings covering 85 per cent of the packaging space. Major cigarettes manufactures including ITC, Godfrey Philips and VST had raised serious concerns over this move.