FTR Holdings, a wholly-owned subsidiary of Phillip Morris, has submitted a proposal to the Government for setting up a 100 per cent owned arm in the country.

Company officials dismissed reports that GPI's trademark and licensing agreement with Phillip Morris was not likely to be renewed by the latter if Godfrey Phillip does not give a no-objection certificate for FTR's proposal.

"We have an ongoing agreement with Phillip Morris without any time period. The agreement has been in place for the past 16-17 years. The agreement can be terminated only in case of a conflict between the two partners and that too with mutual consent," the officials said.

"We have not received any communication from Phillip Morris that the agreement will be terminated if we do not give them a no objection certificate (NoC),"they said, adding that Phillip Morris had not even sought any NoC from Godfrey Phillip so far.

Officials said that Godfrey Philips has a licensing agreement with Phillip Morris only for Four Square brand of cigarettes and not for Red & White and Cavenders. "The Red & White and Cavenders brands are owned by Godfrey Philips", they said.

The officials stated that there was no conflict of interest between Godfrey Philips and Phillips Morris "if our foreign partner is setting up its subsidiary to process tobacco and not manufacture cigarrttes".

The Modis are also understood to have clarified that they have no intention to either exit from cigarette manufacture or to dilute its stake in Godfrey Philips.

KK Modi group owns 32 per cent equity stake in GPI, Phillip Morris holds 36 per cent and the MK Modi group holds 11 per cent.

FTR Holdings had stated in its application before the Foreign Investment Promotion Board (FIPB) that it has no share holding or equity investment in any Indian company, nor has itany technological agreement with any company within the country.

FTR Holdings has stated in its application that the proposed subsidiary is for undertaking research and technical services to improve tobacco leaf quality and yield, setting up a processing plant using proprietary expanded technology to produce cut-tobacco in bulk, selling cut-tobacco products in bulk to licensed cigarette manufacturers and providing marketing, advertising and distribution support to cigarette manufacturers.

The project is to implemented with a total investment of Rs 320 crore over seven years, of which Rs 160 crore ( $37.5 million) will be equity.

As a general practice, the Government has been insisting that a proposal by a foreign company for setting up a wholly-owned subsidiary be accompanied by a no-objection certificate from the domestic joint venture company, if such a venture exists.