Tobacco FDI attracts global lobby

International governments and global tobacco players from Switzerland, Japan and the US have come together to lobby against a government move to ban Foreign Direct Investment (FDI) in tobacco.

India currently allows up to 100 per cent FDI in this sector, but the health ministry has moved a draft note for the cabinet to ban foreign investment in this sector.

This move is likely to re-focus attention on a proposal from Japan Tobacco International (JTIL), which has applied to the Foreign Investment Promotion Board (FIPB) to raise its stake in its Indian venture from 50 to 74 per cent. The application has been pending for over seven months.

JTIL's proposal is considered a test case, given that no application on tobacco has been cleared by the FIPB since 1998 owing to strong opposition from the domestic tobacco lobby and sections of the government. Domestic tobacco companies have opposed the entry of any new tobacco player or an increase in stakes by incumbent foreign companies.

Sources said top officials from the Japanese government have met finance ministry officials pleading the Japan Tobacco case. The case came up for hearing in the last FIPB meeting on January 9, but no decision was taken.

Meanwhile, Dominique Dreyer, Swiss ambassador to India, is said to have written to the Department of Industrial Policy and Promotion (DIPP) recently making a case for a proposed increase in investments by a Swiss affiliate of US tobacco major Philip Morris International in Godfrey Philips. Philip Morris has a 35.93 per cent stake in Godfrey Philips with K K Modi as the Indian partner. The issue of increasing its stake has been pending for several years.

Sources said the Swiss ambassador has said in his letter to DIPP that the Indian government should consult all stakeholders before adopting any substantial change to its investments and trade rules applicable to tobacco products.

The ambassador’s letter has reiterated that the Indian government’s current policies effectively limit manufacturing capacity in tobacco, so new or additional FDI would not increase India’s cigarette manufacturing capacity.

Phillip Morris International Chairman and CEO Louis C Camilleri has also written a letter to Commerce Minister Kamal Nath saying protectionism is the wrong answer and an ineffective tool for addressing public health objectives and will only entrench the few existing participants to the detriment of others.

Camilleri argued that the health effects of tobacco should be addressed through regulation that is applied to domestic and imported products as well as to all manufacturers.