DELHI: As the matter of fact FDI in tobacco manufacturing has been banned since 2010 in India, foreign tobacco companies can invest through licensing agreement, technological collaborations and by forming trading companies. However this proposal has been opposed by NITI Aayog.
PRO’s of the ban:
Under WHO’s Framework Convention on Tobacco Control (FCTC), India has to reduce higher consumption of tobacco products as India is an integral part and obliged under this convention.
Such proposal may also reduce government’s health expenditure related to tobacco consumption.
It might bring a control on consumption of tobacco promoting healthier lifestyles.
It will end participation of foreign companies in India leading to loss of investments and livelihoods of tobacco farmers.
Under no convention internationally complete ban is mentioned, not even WHO’s FCTC .It does not contain any provisions for banning FDI in tobacco sector as a means of reducing tobacco use.
Foreign tobacco companies like Phillip Morris International of USA says such a ban may be protectionist and discriminatory. India can be challenged under various BITs on account of causing discrimination in domestic and foreign manufacturers.
India has an $11 billion tobacco industry and ban will yield to a loss of employment and foreign exchange with proposed restrictions.
It is unsure that banning foreign manufacturers would reduce tobacco use. The foreign manufacturers may be replaced by domestic ones with the tobacco consumption being intact.
Concluding Remark: India should consider alternative regulatory mechanisms which may better achieve a reduction in tobacco consumption like plain packaging regulations, increase taxes on cigarettes, involving bidis in taxation etc. rather than having a blanket ban on FDI in tobacco sector.
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