Indian Government Considering Ban on Imported Cigarettes
If you are a fan of Marlboro, Camel, or any other famous cigarette brands, imported to India, you should better start stocking up, as Indian government is currently debating over possible restrictions on the importations of tobacco products and a total ban on foreign presence in wholesale sales of cigarettes and other tobacco products.
The measure is considered two years after India’s authorities prohibited direct investment of foreign companies into cigarette production industry.
Local Department of Finance has sent a letter to the Ministry of Commerce asking it to consider implementing restrictions on imports of cigarettes in the latest foreign trade legislation.
“There is an opinion that foreign direct investment (FDI) should be banned in wholesale trade as well, and that the government must introduce restrictions on tobacco imports,” an official privy to the development at the government noted.
FDI in tobacco production was prohibited in 2010, however wholesale trade operations were not affected and available for the investments. After the 2010 ban entered into effect, several tobacco groups with FDI established wholesale trade operations to serve local demand.
The introduced proposal to limit imports will be beneficial for ITC, local cigarette maker domestic cigarette manufacturer ITC, which holds leading position in the nation’s cigarette market.
At the same time, several companies that depend on imported cigarettes in their business, like Godfrey Phillips, might have to restructure their operations.
“The lawmakers are implementing a set of measures that is not foreign investor friendly. The latter proposal is one of such measures,” admitted KK Modi, head of Godfrey Phillips India, a joint-stock company with Philip Morris International, the largest cigarette maker in the world, for wholesales of tobacco products, such as Marlboro and Bond Street.
Industry experts state a total ban may not be in the consideration since due to India being a part of World Trade Organization commitments.
Cigarettes may be imported according to the open general licence (OGL), a broad type of import license that does not bear any export liability on the importers, in contrast to other types of licenses, which have restriction over the amounts or exportation.
Three Indian Ministries, among which are the finance, health and commerce ministries, are involved in talks over the issue in the threshold of the new foreign trade policy.
The head of Foreign Trade has introduced the consultations on taking off cigarettes from the Open General License, following the urge of Consortium of Indian farmers Associations, which requested prohibiting cigarette imports.
“Adult smokers will continue to buy cigarettes from other sources,” Modi said.
The proposal to prohibit direct foreign investment in cigarette production was introduced shortly after Japan Tobacco International declared its intention to increase stake its Indian division from 50% to 74%.
Earlier, British American Tobacco tried to increase its stake in ITC but didn’t manage to. Currently, BAT is the largest shareholder in ITC, holding nearly 32% of shares.
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