India plans to impose comprehensive curb on foreign direct investment in tobacco sector

India plans to impose comprehensive restriction on foreign direct investment (FDI) in the tobacco sector by extending the present ban to tie-ups on franchise, trademark, brand name and management contract to prevent piggyback entry and smuggling of foreign brands.

- AMITAV RANJAN

At present, FDI is prohibited in manufacturing of cigars, cheroots, cigarillos and cigarettes of tobacco or of tobacco substitutes. However, foreign technology collaboration is allowed for licensing for franchise, trademark, brand name and management contract.

That provides a backdoor to foreign firms for infusing FDI in a company owning a brand trademark. And thereafter, it could enter into a brand or trademark agreement with an Indian company engaged in the manufacturing of cigarettes.