Philip Morris disturbed by Indian proposal to prohibit foreign tobacco investment

Philip Morris

Philip Morris International is fighting to keep a toehold in India’s $11 billion tobacco market, as the government considers further tightening foreign investment rules in the sector.

In previously reported letters from Philip Morris to the trade minister and an influential government think-tank, the U.S.-based company said the "discriminatory" and "protectionist" proposals would represent a blow to its plans to launch new products and make further investments in India.

The two letters dated May and October last year followed local media reports of a possible change in government policy. While the warnings may be part of the firm's negotiations, they show the level of concern the proposals are causing.

Since 2010, India banned foreign investment in cigarette manufacturing, but it still allowed tobacco companies to invest through technology collaboration and licensing agreements. Investments could also be made by forming a trading company.

Over the past year, the government has been considering whether to stop these, in a bid to safeguard public health interests, according to the documents and a senior government official.

Lobbying drive

Outlining the firm's importance to India's economy, Philip Morris said in its letters that it spent $460 million on tobacco leaf over the previous five years and more than $200,000 on corporate charities each year. It also says that it has employed more than 90 people in its India unit.

Philip Morris' King wrote to the trade minister in May, saying the reported proposals would "dent India's credibility as a reliable investment destination."

"There should be a comprehensive ban on foreign collaboration in any form," the health ministry wrote on July 27, adding wholesale trading in tobacco should be banned as well.

Philip Morris wrote again in October to argue its case, this time to NITI Aayog, the think-tank.

It said an investment ban could "raise significant concerns" about India's compliance with its obligations under international trade and investment treaties.

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