A worker rolls tobacco leaves at a tobacco plantation. India occupies third position globally in terms of production of tobacco and in exports, after Brazil and China.(Bloomberg)
A worker rolls tobacco leaves at a tobacco plantation. India occupies third position globally in terms of production of tobacco and in exports, after Brazil and China.(Bloomberg)

Panel seeks 100% FDI in tobacco production

The parliamentary committee on commerce, however, also listed conditions for such FDI in a submitted to Rajya Sabha chairman Venkaiah Naidu on Wednesday.
Hindustan Times, New Delhi | By Saubhadra Chatterji
UPDATED ON AUG 27, 2020 05:38 AM IST

A multi-party committee of Indian Parliament has asked the Narendra Modi government to impose 1% tax on cigarettes help tobacco farmers and allow 100% FDI in tobacco production and cigarette manufacturing, to boost one of India’s major cash crops.

The parliamentary committee on commerce, however, also listed conditions for such FDI in a submitted to Rajya Sabha chairman Venkaiah Naidu on Wednesday. “The tobacco produced by FDI would be marketed through auction platforms. Also, FDI may be permitted in cigarette manufacturing wherein the value addition of such products is done only in SEZs for export purpose with no domestic sale,” it said.

India occupies third position globally in terms of production of tobacco and in exports, after Brazil and China. In the last financial year, tobacco and tobacco products contributed about Rs.22,737crore in excise revenue to the union exchequer. They also earned around Rs.5870 crore through foreign exchange.

The panel, headed by V Vijayasai Reddy, argued that as per the 2017 FDI policy, 100% FDI is allowed in tea, coffee, rubber and cardamom plantation and cultivations under automatic entry route. “The Committee is of the opinion that the Foreign Direct Investment (FDI) in tobacco sector albeit in a regulated manner would stimulate the production and processing of Indian tobacco thereby boosting its export,” the report added.

The panel has asked the commerce ministry to “undertake a study to analyse the prospects of opening FDI investments in the tobacco sector at the earliest”.

The commerce committee of Parliament maintained that “tobacco farmers, at times, are forced to sell their tobacco at prices less than their cost of cultivation.”

“Therefore, 1% of tax on the sale of cigarettes may be imposed and the amount thus accumulated should be utilized as ‘Market Stabilization Fund’ for tobacco. The additional special levies on sale of cigarettes may be expended on starting market intervention in the interest of the welfare of tobacco growers,” it recommended.

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