Twenty-five MPs have written to Prime Minister Atal Bihari Vajpayee lobbying for 100 per cent FDI in the cigarette sector. The criticism of such a policy by "vested interests" is "more moralistic in nature rather than practical," they said.
Copies of the letter have been sent to Union fiance minister Yashwant Sinha, industry minister Sikander Bakht and home minister L K Advani.
The MPs, both from the Lok Sabha and the Rajya Sabha, criticised the domestic cigarette manufacturers for resisting moves to allow foreign players, thus maintaining a monopoly.
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"Domestic cigarette manufacturers have always resisted any move by the overseas partners to increase their shareholdings thereby maintaining their stanglehold on the farmers and the prices of the agricultural produce," The MPs said.
It has been further stated: "There has been a glut in the tobacco market due to excess production (total production 131 million kgs) and insufficient quantities of good quality tobacco. We understand farmers were forced to burn 15 million kgs of tobacco in Andhra Pradesh.
The entry of foreign manufacturers like Rothmans will help substantially improve the off-take by exporters who purchased only 24 per cent of the entire 1997-98 tobacco crop."
The letter has been written as part of the ongoing debate on whether to allow 100 per cent FDI in the cigarette sector. A certain section of politicians, including Sinha, are opposed to the move and demand a review of the proposed policy.
The MPs have written that countries like China, Brazil and Zimbabwe have been wooing foreign buyers of tobacco who originally came to India and the "government must take all steps to maintain India's competitive position by improving the standards of the industry."
Meanwhile, Rothmans has reiterated that it would divest at least 26 per cent of its equity in the proposed 100 per cent subsidiary to India residents.
Rothmans had stated in its application to the FIPB: "Approvals resquested to divest 26 per cent of its equity in such a (100%) susbidiary to Indian residents, either to a joint venture partner or by way of public offering or both, within a period of five years once the company has been fully capitalised and is an established business."
Rothmans of Pall Mall (International) Ltd had moved the Foreign Investment Promotion Board (FIPB) last year to set up a 100 per cent susbsidiary with an initial authorised equity share capital of the rupee equivalent of $ 150 million to purchase and export from India tobacco, indulge in agronomic development of Indian tobacco and the introduction of international brands of the Rothmans International Group like Dunhill and Rothmans,amongst other things.
Rothmans is also believed to have agreed to the commerce ministry riders like export of tobacco and processed tobacco from its proposed Indian subsidiary.