Five American trade bodies, including USIBC, have joined hands to oppose the efforts of the Indian Government to further restrict the participation of foreign companies in India’s tobacco market.

According to reports, the India’s Commerce Ministry, on the request of Health Ministry, has proposed to put a complete FDI ban in the sector.

Currently, foreign direct investment (FDI) is completely prohibited in the manufacturing of tobacco and its substitutes, while such investments are allowed up to 100 per cent in wholesale trading of cigarettes through the approval route.

In a letter to the Indian Ambassador to the US, Ms Nirupama Rao, the US industry organisations said: “Some proponents of further restrictions have apparently cited public health as a justification, but since there is absolutely no difference in the health effects from consuming Indian or foreign tobacco products, that argument cannot be taken seriously.’’

Noting that the Indian market is dominated by domestic companies, it is hard to understand any concern about the ability of Indian industry to compete.

It said that 99.6 per cent of the market is held by domestic Indian companies and one large Indian company controls 80 per cent of the market.

“We fail to see the problem with companies investing in a manner that is consistent with Indian law.

“In short, the arguments of the proponents of additional restrictions do not contain a valid rationale, unless one considers valid the parochial political notion that India should be rid of even the minuscule foreign company competition that currently exists,” the letter said.

The US organisations said that this issue raises serious concerns about India’s willingness to stand by its proclamation to welcome foreign investors per current policy and calls into question India’s adherence to its international obligations.

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