The sharp differences between Indian companies and farmers over allowing foreign investment in the $11 billion tobacco industry came to the fore in a meeting called by a government body on Wednesday.

Share Market Live

NSE

The Department of Industrial Policy and Promotion (DIPP), the nodal agency for the decisions related to foreign direct investment (FDI), had called a meeting of all stakeholders, including farmer associations, private companies and government departments, to discuss issues related to FDI in the sector.

India banned foreign investment in cigarette manufacturing in 2010. But tobacco companies can invest through technology collaboration and licensing agreements or by forming a trading company.

No Dearth of Interest

A bunch of foreign tobacco companies such as Philip Morris have been pumping capital in the sector through this route. To plug this loophole, DIPP had initiated a Cabinet proposal in 2016 to completely ban FDI in the sector. But the proposal came to nought after intense lobbying by some companies and farmer organisations.

The government has in recent months been examining whether to stop such forms of investments as it looks to safeguard public health.

At Wednesday's meeting, ITC, the biggest player in the sector, called for a complete ban on FDI, said people familiar with the matter. The company was supported by a few farmer organisations from Karnataka, they said, requesting anonymity.

But other Indian companies such as Modi Enterprises asked DIPP not to consider any further FDI restrictions in the sector.

“We demanded a level playing field for the tobacco industry in India,” said KK Modi, chairman, Modi Enterprises. "Most large tobacco companies are already in India … banning FDI in tobacco won't change anything.”

Modi said foreign investments in the sector are already low because no new industrial licences have been given. Banning it completely will promote monopoly, according to him.

Divided They Stand

Even farmer organisations were divided over the issue. Some supported restricting foreign investments in the sector while others rooted for infusion of foreign capital. “There are limited players in tobacco industry. FDI in tobacco should not be banned,” said Yashwant KC of Peridepi Tobacco Farmers Society. "FDI in tobacco sector leads to better technology.”

Around 24 stakeholders, including representatives of Modi Enterprises, Godfrey Phillips India Ltd, Phillip Morris International and ITC, among others, attended the meeting. Members of the Confederation of Indian Industry (CII) and US-India Business Council (USIBC) were also present in the meeting along with several farmers organisations such as Andhra-based Peridepi Tobacco Farmers Society, Musi Bank Tobacco growers association, as well as Federation of All India Farmers Association.

First Published:Apr 11, 2018 4:27 PM IST