Government on Thursday banned foreign direct investment in cigarette manufacturing. “FDI will be prohibited in the manufacture of cigarettes, whether it is for domestic consumption or for exports,” home minister P Chidambaram told reporters after the meeting of the Cabinet Committee on Economic Affairs.

The prohibition will be notified, he said, adding the ban would also be applicable in the special economic zones. The proposal was mooted by the department of industrial policy and promotion in the ministry of commerce and industry.

Under the existing norms, 100 per cent FDI is permitted in cigarette manufacturing, but an industrial licence is required and the proposals need to be approved by the Foreign Investment Promotion Board.

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Press Release by Cabinet Committee on Economic Affairs (CCEA)

Proposal to prohibit foreign direct investment in the manufacturing of Cigarettes

The Cabinet Committee on Economic Affairs today approved a proposal of the Department of Industrial Policy & Promotion, Ministry of Commerce & Industry to prohibit FDI in manufacturing of cigarettes and to include the activity in the list of activities prohibited for FDI.

Presently, FDI up to 100% with prior Government /Foreign Investment Promotion Board (FIPB) approval is permitted in manufacture of Cigarettes, subject to the undertaking obtaining an industrial license under the Industrial (Development & Regulation) Act, 1951.

The approval is expected to enhance public accountability by way of the Government’s commitment towards proliferation of anti-smoking regime in the country. This would bring the policy in line with the administrative decision not to grant industrial licence for cigarette manufacturing. It will also align the FDI policy with the existing legislation on Tobacco control to a greater extent.

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