Govt notifies FDI ban in cigarette manufacturing

Written by fe Bureaus | New Delhi | Updated: May 11 2010, 05:35am hrs
The department of industrial policy & promotion (DIPP), the nodal department for framing the FDI policy, on Monday issued a notification banning foreign direct investment in manufacturing of cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes. These products have been included in the list activities/sectors prohibited for FDI. The DIPP issued amendments to this effect in the consolidated FDI policy on Monday.

Last month, the Cabinet Committee on Economic Affairs (CCEA) has approved the proposal from to ban FDI in the tobacco sector, jeopardising plans of Japan Tobacco, BAT and the Altria Group in India. The ban had shut the door permanently on Japan Tobaccos proposal to invest $100 million into its Indian subsidiary. The move will leave the field wide open for ITC to increase its dominance in the growing cigarette market. In India, three major cigarette players dominate the market, primarily ITC with more than 50% market share. Godfrey Phillips and VST are two major players after ITC. The move to ban foreign investments in tobacco has been controversial since the proposal came soon after Japan Tobacco announced its intention to raise its stake in the local unit to 74% from 50%.