Taking forward the commitment to discourage foreign equity in tobacco trade, the Union Cabinet on Thursday banned Foreign Direct Investment (FDI) in cigarette manufacturing.

Commerce and Industry Minister Anand Sharma recently asserted that there was no room for allowing FDI in cigarettes and tobacco and appropriate measures would be taken soon to curb this. His Ministry had moved the Cabinet on the issue the FDI issue, which got the final approval of the Cabinet Committee on Economic Affairs (CCEA) on Thursday.

Briefing newsmen after the Cabinet meeting, Home Minister P. Chidambaram said FDI would be prohibited in cigarette manufacturing, whether it was for domestic consumption or exports. “The approval is expected to enhance public accountability by way of the government's commitment towards proliferation of anti-smoking regime.”

The decision is the latest in the government's long-standing drive against smoking. In 2008, it banned smoking in public places and put a curb on tobacco advertisements.

The proposal to ban FDI was mooted by the Department of Industrial Policy and Promotion and approved by the CCEA.

Asked about the existing foreign investment in the tobacco sector, Mr. Chidambaram said the matter did not come up for discussion. Under the existing norms, 100 per cent FDI was permitted in cigarette manufacturing, but an industrial licence was required and the proposals needed to be approved by the Foreign Investment Promotion Board.

With the CCEA banning foreign inflows, Mr. Chidambaram said, “this would bring the policy in line with the administrative decision not to grant industrial licence for cigarette manufacturing.”

The move would also align the FDI policy with the existing legislation on tobacco control to a greater extent, he said.

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