The Ministry of Commerce and Industry is working on a proposal to further tighten foreign direct investment (FDI) norms to ban promotional activities and curb smuggling in the tobacco sector. Giving this information, an official said that companies are trying to circumvent the rules in this regard, so the government wants to tighten the rules on FDI.
This is the rule now
Currently, there is a ban on foreign direct investment (FDI) in the manufacturing of cigars, cigarillos, cigarillos and cigarettes. However, FDI is permitted in any type of technological collaboration in the tobacco sector. This includes licensing agreements, trademark, brand name and franchise management.
The official said that FDI in tobacco is prohibited and there is also a need to control promotional activities in the sector. By promoting these products, some companies are trying to create a system that increases smuggling. The Department for Promotion of Industry and Internal Trade (DPIIT) has issued a draft note seeking the opinion of various ministries on this issue.
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Government working on this standard
The official said that promotional activities include proxy advertising, brand advertising through various media and creating awareness about the brand. The official said that we are saying that FDI is prohibited in the tobacco sector and its promotional activities should also be banned because companies are trying to circumvent the norms.
The ban was imposed in 2016.
In 2016, the ministry had also submitted a proposal to completely ban FDI in the tobacco sector. According to the proposal, the ministry had proposed to ban FDI in licensing of franchises, trademarks, brand names and management contracts in the sector. However, due to concerns from some quarters, including tobacco growers’ associations and companies, the government could not take any decision on the matter.
That’s why the government is making rules.
The domestic tobacco industry is mainly influenced by ITC Limited. The issue of FDI in the tobacco sector is also important because India is one of the countries that has signed the World Health Organization (WHO) treaty on tobacco control. According to this treaty, the countries concerned have the responsibility to reduce the consumption of tobacco products.
According to government data, equity FDI inflows to India declined 3.49 per cent to $44.42 billion in 2023-24 due to lower investment in sectors such as services, computer hardware and software, telecom, automobiles and pharmaceuticals. FDI inflows during 2022-23 stood at $46.03 billion.
