The government is examining a proposal to fully ban foreign direct investment (FDI) in the tobacco sector as part of the broader strategy to reduce consumption of health hazardous products and check illicit fund flow into the segment.
The commerce and industry ministry, which is piloting the move, has circulated a draft cabinet note seeking views from various ministries, top government sources told HT.
Currently, India does not allow FDI in manufacturing of cigars, cigarettes of tobacco and tobacco substitutes.
FDI is, however, allowed in technology collaboration in any form, including licensing for franchise, trademark, brand name and management contract. Once implemented, the new policy would prohibit FDI even in these areas resulting in a total ban on overseas funds in the tobacco sector.
“The focus is on cutting down the consumption and production of tobacco-related health hazardous products,” an official, who did not wish to be identified, told HT.
“The proposal to ban FDI is part of this overall plan,” the official said.
Emails sent to tobacco companies ITC and Godfrey Philips did not elicit any response.
India is signatory to the Framework Convention on Tobacco Control, which places the onus on the government to initiate steps to cut tobacco consumption.
The government has been progressively increasing taxes on cigarettes and other tobacco products aimed at making this costlier and wean people away from the harmful products.
A new rule, under which all tobacco manufactured products are required to carry larger pictorial health warnings covering 85% of the packaging space, kicked in from April 1. The move triggered howls of protest from the industry with tobacco companies arguing the rule will encourage illicit trade. Existing pictorial warnings at 40% of the front of the pack are adequate to warn and caution consumers, companies said.
According to WHO estimates, nearly a million people die in India annually due to tobacco. The economic burden attributable every year to tobacco-related diseases is about Rs 1,04,500 crore, about 75% of India’s food subsidy budget.
India is ranked 136 of 198 countries according to the international status report on Cigarette Package Health Warnings, 2014 and countries ranked after 143 do not display pictorial health warnings at all.