The government is mulling on a proposal to completely ban foreign direct investment (FDI) in the tobacco sector. Currently FDI is allowed in various forms of technology collaboration including licensing for franchise, trademark, brand name and management contracts in the sector and is not permitted in manufacturing of cigars, cigarettes of tobacco and tobacco substitutes, but now the government will consider closing this route as well for FDI.
There were reports that the Commerce and Industry Ministry is proposing to even ban FDI in licensing for franchise, trademark, brand name and management contract in the sector and inter-ministerial discussions were held in this regard and the proposal may be taken up by the cabinet soon. The ministry has already circulated a draft Cabinet note to seek views of different departments including health, finance, commerce and Niti Aayog.
The ban would eliminate the possibility of indirect flow of overseas funds to the tobacco sector and the major cigarettes manufactures have raised serious concerns over this move. But even if the proposal is okayed, existing collaborations will not be affected as it would be applicable only prospectively.
India is signatory to the Framework Convention on Tobbaco Control, under which it has the responsibility of reducing consumption of tobacco products and had recently made it mandatory to carry larger pictorial warnings on cigarette packets.
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