Government Plans to Tighten FDI Norms in Tobacco Sector

Union Commerce Minister Piyush Goyal announced that the government is considering stricter Foreign Direct Investment (FDI) regulations in the tobacco industry. The new norms would restrict franchises, trademarks, and branding related to tobacco products, replacing earlier deliberations on FDI liberalization. The proposal awaits approval from the Cabinet.

Union Commerce Minister Piyush Goyal revealed on Tuesday that the central government does not intend to liberalize Foreign Direct Investment (FDI) norms in the tobacco sector. Speaking at an industry event in New Delhi, Goyal noted that the government is contemplating tighter regulations instead.

The proposed measures would place restrictions on FDI encompassing tobacco product franchises, trademarks, and any branding activities. Existing government regulations already prohibit FDI in the manufacturing of tobacco products in India.

The proposal is currently being reviewed by the Commerce Ministry and may be forwarded to the Cabinet for final approval. The tobacco industry, often subject to regulatory scrutiny, could see these changes, especially as tobacco is classified under the highest GST tax bracket of 28 percent, with additional 'sin' taxes ranging from 61 to over 200 percent.

In 2020, a parliamentary panel recommended exploring regulated FDI in the sector to boost tobacco product exports. This aligns with India's status as a significant exporter, having shipped over USD 100 million in cigarettes in 2022. The sector employs around 36 million people across farming, processing, manufacturing, and export activities.

The industry anticipates further regulatory changes, particularly as the Union Budget approaches, scheduled for July 23. (ANI)

(With inputs from agencies.)