DPIIT working on proposal to further tighten FDI norms in tobacco sector
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The Department for Promotion of Industry and Internal Trade (DPIIT) is working on a proposal to further tighten the foreign direct investment (FDI) norms in the tobacco sector to check promotional activities and curb smuggling in the segment as firms are trying to circumvent norms. At present, FDI is prohibited in the manufacturing of cigars, cheroots, cigarillos and cigarettes of tobacco or its substitutes.
However, it is permitted in technology collaboration in any form, including licensing for franchise, trademark, brand name and management contracts in the tobacco sector. FDI in tobacco is prohibited, and there is a need to control the sectors' promotional activities also. By doing promotion of those products, some companies try to create a system where smuggling increases.
The DPIIT has circulated a draft note seeking the views of different ministries on the issue. The promotional activities include proxy advertising, brand promotion through various ways, and creating brand awareness. FDI in the tobacco sector is prohibited, and its promotional activities should also be prohibited as the companies are trying to circumvent norms.
