Foreign Direct Investment In Tobacco Production Can Be Banned
Government plans to prohibit foreign direct investment (FDI) in tobacco production. The cabinet noted that this decision was prepared by the ministry of commerce and industry and extended among the other ministries of the cabinet committee on economic affairs (CCEA).
This ban on FDI in producing of cigarettes will affect the most actual foreign tobacco buyers, and of course the future tobacco investment purposes in the country. Nevertheless, it will not influence their investitures in India. For example, actually, three major global Tobacco Companies (players) — Japan Tobacco, British American Tobacco (BAT), and the Altria Group – all have big tobacco investments in India.
The cabinet also proposed to prohibit the votes for foreign companies to make cigarettes for domestic consumption only.
In the end all the main ministries have given their approbation to ban FDI in cigarette manufacturing. These approves were then sent to the industry and commerce ministry on February 3rd, and then finance ministry accepted the ban too. Although, the Planning Commission has also supported the new law, health ministry proposed also to enter cigarette in the list of activities that are banned for FDI. So, 100% FDI is allowed in the branch with superior government approval.
If the cabinet accepts the new proposal, then it will influence the plan of Japan Tobacco, with its personal brand like Camel, for to increase its venture in Indian from 50% to 75%, with an investment of $100 million. At present, the remains 50% in the company are owned by KK Modi group.
BAT also desire to increase its ventures in ITC from 31.8% to 51%. In 1996-97, BAT attempt to hike wager was opposed by the financial establishments’ candidates. But now if this ban will be accepted by CCEA, BAT would not raise its stake in ITC and it will remains to be at least professional company without any sponsor. In Godfrey Philips India, Altria group owns 25% wager. This company also has recently launched its famous brand Marlboro in India.
The intention to ban FDI in tobacco manufacturing was even on January 23, 2009, but it was not approved. That’s why the CCEA at the beginning of this year decided to send it proposal to Government for to be approved finally.
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