FIPB's decision on the proposal will be crucial as merely three days ago the Tatas announced withdrawal of their airline project with 40 per cent foreign investment after FIPB repeatedly deferred their application.

Rothmans has proposed to bring in $150 million as FDI in its Indian venture and also plans to export a substantial part of its production. Rothmans has also stated that it will not repatriate dividends for seven years.

Industry sources say that clearance to the Rothmans' proposal could open floodgates for other international cigarette majors such as Phillip Morris which have been eyeing the huge Indian market but could not make an entry due to the government's oppositionto foreign investment in this sector so far.

Industry minister Sikandar Bakht has defended the government's decision to allow 100 per cent FDI in a non-priority area of cigarettes on the grounds that it would help tobacco farmers, who have been reeling under the pressure of falling tobacco prices.

At the same time, domestic cigarette companies are also lobbying strongly against the decision. The government is also facing opposition to its decision from a powerful section of Rashtriya Swayamsevak Sangh (RSS), which is the parent body of Bharatiya Janata Party. Swadeshi Jagran Manch, an RSS ally, went to the extent of holding a press conference to denounce the government's decision to allow 100 per cent FDI in cigarette industry.

The lobby opposing entry of cigarette multinationals believes that it would spread the smoking culture in the country, specially among the youth, as these companies, armed with strong financial muscle, will aggressively market and advertise their brands.

On the other hand, thesupporters of free entry of foreign companies in the sector argue that cigarette smokers in the country have been made to put up with cigarettes which, when compared to international standards, have high tar content since domestic companies did not invest in technology upgradation to improve quality standards.