NITI Aayog concerned over total FDI ban in tobacco sector

Major cigarette manufactures including Godfrey Philips have also raised serious concerns over this move

The proposal to completely ban foreign direct investment (FDI) in the tobacco sector has run into rough weather as NITI Aayog has raised certain issues on the plan.

However, the proposal of the Department of Industrial Policy and Promotion (DIPP) has got the support of the Finance Ministry.

The DIPP is expected to soon hold discussions with the Department of Commerce and NITI Aayog on the issue, an official said.

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.

The DIPP has proposed 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 the tobacco segment in any form.

According to a source, 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.

The move also assumes significance as India is signatory to the Framework Convention on Tobacco Control, under which it has the responsibility of reducing consumption of tobacco products.

It is also mandatory for all tobacco products to carry larger pictorial warnings covering 85% of the packaging space.

Major cigarette manufactures including Godfrey Philips have raised serious concerns over this move.