Centre will not liberalise foreign direct investment in tobacco sector: minister

New Delhi:

The central government is not inclined to liberalise foreign direct investment (FDI) in the tobacco sector, commerce minister Piyush Goyal said on Tuesday.

The minister, on the sidelines of an industry event in New Delhi, also suggested that the government was considering tightening norms on foreign direct investment in the tobacco industry.

The government is considering imposing restrictions on foreign direct investment (FDI) for all tobacco franchises, trademarks and all brands of tobacco and similar substitutes.

Currently, foreign direct investment in tobacco production in India is not permitted under government regulations.

The proposal to tighten foreign direct investment (FDI) norms in the tobacco sector is currently under consideration by the Ministry of Commerce and may be sent to the Cabinet for approval once the final version of the proposal is ready.

The tobacco industry, considered a sin industry, often faces regulatory pressure, including potential tax hikes. Tobacco is placed in the highest tax bracket of 28 percent under the Goods and Services Tax (GST). In addition, a sin ranging from 61 percent to over 200 percent is applied to various tobacco products.

In 2020, a parliamentary panel of the Ministry of Trade and Industry recommended exploring the prospects of allowing regulated foreign direct investment (FDI) in the tobacco sector to boost tobacco exports. The panel also recommended export-only tobacco farms to boost tobacco exports.

India is a major net exporter of cigarettes. According to UN Comtrade, it exported more than $100 million of cigarettes in 2022, compared to almost $26 million in imports. According to IBEF, the tobacco industry in India employs about 36 million people in agriculture, processing, manufacturing and exports

The tobacco industry often faces regulatory pressure, including potential tax increases, especially ahead of the federal budget. This year, the federal budget will be presented on July 23.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

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