Tobacco companies shed tears of blood: FDI ban on the sector

The proposal of the Department of Industrial Policy and Promotion (DIPP) for complete ban of foreign direct investment (FDI) on tobacco sector has got the support of the Finance Ministry. Meanwhile, NITI Aayog has raised concern issues on the plan. The Cigar and Cigarette manufacturer has 100 per cent FDI prior approval from Foreign Investment Promotion Board (FIPB).

The DIPP is expected to soon hold discussions with the Department of Commerce and NITI Aayog on the issue. Now, FDI is permitted in technology collaboration in any form, including licensing for franchise, trademark, brand name and management contract in the tobacco sector. However, it is banned in manufacturing of cigars, cigarettes of tobacco and tobacco substitutes.

The DIPP has proposed to even ban FDI in licensing for franchise, trademark, brand name and management contract in the sector. At last there will be complete ban on FDI in the tobacco segment in any form.

Earlier, as per government’s guidelines all tobacco products should carry larger pictorial warnings covering 85 per cent of the packaging space.

On June 9, the sector's major companies like ITC, Godfrey Philips and Golden Tobacco declined by 2.39 per cent, 1.24 per cent 2.08 per cent respectively on an intraday basis. However, VST Industries share price has increased by 1.42 per cent on an intraday basis.