India's Cabinet Bars Foreign Direct Investment in Cigarette Manufacturing

Cigarette makers such as Japan Tobacco Inc. may have to put their plans to expand in India on hold after the country’s cabinet decided to bar foreign direct investment in cigarette manufacturing.

“This would bring the policy in line with the administrative decision not to grant industrial license for cigarette manufacturing,” the government said in a note today.

The decision by the Cabinet Committee on Economic Affairs is part of the government’s policy to discourage smoking. India banned smoking nationwide in public places including office buildings, restaurants and pubs on Oct. 2, 2008, to prevent smoking-related diseases. Deaths from smoking are expected to rise to 1 million this year.

The rules allowed 100 percent foreign direct investment in cigarette making if the manufacturer could obtain an industrial license and the proposal was approved by India’s Foreign Investment Promotion Board.

Japan Tobacco, the world’s third largest publicly traded cigarette maker by sales, has been waiting for Indian government approval to expand production since June 2008, Executive Deputy President Masakazu Shimizu said in March.

“We are aware of this news and are currently in the process of verifying the decision,” Yuka Sugimoto, spokeswoman at Japan Tobacco said in an e-mail response to a query.

To contact the reporters on this story: Bibhudatta Pradhan in New Delhi at bpradhan@bloomberg.net; Saikat Chatterjee in New Delhi at schatterjee4@bloomberg.net

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