DIPP to discuss FDI issues in tobacco sector with stakeholders on April 11

The domestic tobacco industry is mainly dominated by ITC Ltd, which controls over 78% of the segment

The commerce and industry ministry has convened a meeting on April 11 of all stakeholders, including farmer associations, private companies and government departments to deliberate upon issues pertaining to foreign direct investment (FDI) in the tobacco sector.

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

The meeting assumes significance as the Department of Industrial Policy and Promotion (DIPP), under the ministry, had earlier in 2016 floated a proposal to put a complete ban on FDI in the tobacco segment.

In that proposal, the ministry had proposed to ban FDI in licensing for franchisee, trademark, brand name and management contracts in the sector, which mean FDI would be totally banned in the tobacco segment in any form.

However, the government could not take any decision on the matter due to concerns raised in certain quarters, including tobacco farmers' associations and companies like Godfrey Phillips.

"All these issues and concerns are expected to figure in the meeting," sources said.

There were also apprehensions that completely banning overseas investments in the sector could have a possible impact on farmers who are growing tobacco.

The domestic tobacco industry is mainly dominated by ITC Ltd, which controls over 78 per cent of the segment.

The meeting is expected to be attended by officials from departments of commerce and health besides tobacco farmers' associations from Andhra Pradesh, representatives of Godfrey Phillips India, Philip Morris International and ITC.

Representatives from US India Business Council, Virginia Tobacco farmers Associations, Ficci, Andhra Farmers Welfare Association, Federation of All India Farmers Associations (FAIFA) and All India Bidi Industray Association are also among the 24 groups invited for the meeting.

The ministry's call for the meeting also comes at a time when domestic firms are complaining over tobacco rules in India that 'discriminate' against cigarettes through high taxation and graphic pictorial warnings, thereby promoting smuggling.

Last week, farmers' body FAIFA asked the government to investigate the possibility of involvement of multinational tobacco firms in cigarette smuggling in India.

It also claimed that Indian tobacco farmers have lost more than Rs 36.5 billion in the last three years due to loss of volumes of the domestic legal industry to illegal smuggled cigarettes.

Putting a complete FDI ban also assumed importance as India is signatory to the World Health Organisations (WHO) Framework Convention on Tobacco Control, under which the country has the responsibility of reducing consumption of tobacco products.

FDI into the country grew by 9 per cent to USD 43.48 billion in 2016-17.