The commerce and industry ministry issued a cabinet note that seeks to ban foreign direct investment (FDI) in cigarette manufacturing.

According to the note, all the major ministries have given their approvals to ban FDI in cigarette manufacturing. A ban on FDI in manufacturing of cigarettes will affect existing foreign player’ future investment plans in the country, but not existing investments in Indian ventures.
The cabinet note also proposed to prohibit franchise operations for foreign companies to manufacture cigarettes for domestic consumption. It has proposed to allow FDI in special economic zones (SEZs) for exports.
If the cabinet approves the proposal, it will affect the plan of Japan Tobacco International (JTI) to increase its stake in JTI India from 50 to 75 per cent through an investment of USD 100 million. Similarly, BAT wants to increase its stake in ITC from 31.8 to 51 per cent.
At present, three major global players — BAT, JTI and the Altria Group — have large investments in India.
The move to ban FDI in cigarette manufacturing was initiated through a cabinet note dated 23 January 2009. The cabinet committee on economic affairs (CCEA) deferred the proposal and decided for further inter-ministerial consultation. As the inter-ministerial consultation is now over, the commerce department has moved the note to CCEA again for approval. (pi)