The government on Thursday banned foreign direct investment (FDI) in cigarette manufacturing.
“FDI will be prohibited in the manufacture of cigarettes, whether it is for domestic consumption...or for exports,” Home Minister P Chidambaram told reporters after the meeting of the Cabinet Committee on Economic Affairs.
The ban would also be applicable in special economic zones and the Department of Industrial Policy and Promotion will issues appropriate notifications.
Under the existing norms, 100 per cent FDI is permitted in cigarette manufacturing, but an industrial licence is required and the proposals need to be approved by the Foreign Investment and Promotion Board (FIPB).
The ban may shut the door permanently on several multinational companies waiting to increase its dominance in the Rs 17,000-crore branded cigarette market in India.
Japan Tobacco International Ltd’s (JTIL’s) proposal to invest $100 million (about Rs 460 crore) in its Indian subsidiary has been pending with the Foreign Investment Promotion Board for two years, since the health ministry proposed a ban on FDI in the sector.
JTIL is the third-largest cigarette manufacturer in the world and owns brands such as Camel, Winston and Gold Coast.
Others waiting to broaden their scope in India include British American Tobacco (BAT) and the Altria Group.
Godfrey Phillips Chairman K.K.Modi and the ITC spokesman did not return HT’s calls.
India is the second-largest producer of tobacco in the world after China, but only 20 per cent of it is used to make cigarettes.