Despite shutting shop in December, 2011 due to stringent FDI regime in India, the exit plan of Japan Tobacco from its now shut joint venture JT International India (JTIL) has hit regulatory hurdles.
On one hand, the Reserve Bank of India (RBI) wants the JTIL to get a ?post-facto? approval from the Foreign Investment Promotion Board (FIPB) for the write-off of share application money worth around R10 crore received from JTI Mauritius, and on other hand, FIPB says the matter is outside its purview. As a result, now it wants the corporate affairs ministry to look into the matter.
JTIL India was a subsidiary of Japan Tobacco, Asia?s largest cigarette manufacturing company and the world?s third largest publicly traded tobacco firm. It closed its Indian venture last year and surrendered licence its to manufacture 5 billion cigarettes a year to the government. JTIL was selling two international cigarette brands, Gold Coast and Winston, in India shutting shops.
When JTIL India wanted RBI to write-off its share application money worth R10 crore it received from JTIL Mauritius between 1995 and 2011, the banking regulator had asked JTIL to get the approval first from FIPB due to increase in paid up capital from R46 crore to R50 crore. The FIPB permission in 1993 was only for a paid up capital of R46 crore (R23 crore each between JTIL India and JTIL Mauritius).
However, only 50% FDI was allowed in tobacco.
Sources said FIPB believes JTIL could get the approval after its fundings are scrutinised by RBI. In order to widen the scope of its scrutiny, the FIPB is said to have asked for comment from the corporate affairs ministry also.
Foreign Investment Promotion Board says the matter of write-off of application money does not fall under its purview, as it deals with proposals pertaining to foreign direct investments.
JTIL had to close its operations after a change in FDI regime last year, which did not allow it to get any overseas fundings for expansion. Its proposal to hike the FDI cap from 50% to 74% was rejected in 2010 by the FIPB and as per Circular 2 of 2011, no FDI is permitted for manufacturing cigarettes.