INDIA
Government stops Universal Leaf’s plans for India foray

The Indian government has put a lid on the plans of Universal Leaf Tobacco to commence operations in India.

The world’s largest leaf tobacco merchant had proposed to purchase raw tobacco, process it in India and then export 100 per cent of the finished product. The raw tobacco was to be processed in a separate joint venture wherein Universal was to take a 49 per cent equity stake. Even though the law does not prohibit manufacturing of tobacco-related products, the foreign investment promotion board (FIPB) on the recommendation of the health ministry has rejected the proposal on the grounds that it would facilitate greater production of cigarettes in the country.
FIPB had earlier rejected a similar proposal of Universal Leaf Tobacco which is a part of the US$ 3.2 billion Universal Corporation. In its earlier proposal filed last year, the company had sought approval for selling 25 per cent of the processed tobacco stem in the domestic market. After this was rejected by the government, Universal Leaf had revised its proposal and sought to operate as an export-oriented entity to export finished products.
Processed leaf would be exported and the Indian subsidiary would sell only stems in the Indian market. Universal Leaf had also proposed to pick a 49 per cent stake in an Indian company Hari Sundar Tobacco Threshers, engaged in the business of processing raw tobacco. According to the plan, Universal would then have purchased the processed tobacco from its Indian joint venture company to export it. This separate proposal which was linked with the overall plans of Universal in India was also rejected by the FIPB on similar grounds.
The American tobacco leaf company had cited the cases of Standard Commercial Tobacco and Transcontinental Tobacco India, today both Alliance One, where the government had granted approval for a similar line of business in 1998. (pi)

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