Rothmans proposal deferred

NEW DELHI, Sept 5: A proposal by Rothmans of Pall Mall to set up a 100 per cent subsidiary in India to manufacture cigarettes was today p...

NEW DELHI, Sept 5: A proposal by Rothmans of Pall Mall to set up a 100 per cent subsidiary in India to manufacture cigarettes was today postponed by four weeks by the Foreign Investment Promotion Board FIPB.

quot;The board felt that certain clarifications were needed in terms of guaranteed quantity of tobacco to be bought in India by the company,quot; industry secretary and FIPB chairman T R Prasad told newsmen immediately after the board meeting.

The board has also asked the company to give its commitment on export of raw tobacco, processed tobacco and cigarettes from the country. The Rothmans8217; proposal, envisaging setting up of a wholly-owned subsidiary with an initial authorised capital of 150 million, has been pending with the FIPB for over six months.

The subsidiary plans to purchase and export tobacco from India and also bring Rothmans8217; international brands into the country. It was only last week that the government had permitted 100 per cent foreign direct investment FDI in cigaretteindustry.

FIPB had earlier deferred a decision on Rothmans pending recommendations of an intra-ministerial committee on the need to cap foreign equity for cigarettes.

The run-up to the FIPB meeting had witnessed intense lobbying for and against Rothmans8217; proposal by different political groups as in the case of Tata Airlines.

Chief ministers of Maharashtra, Karnataka, Andhra Pradesh and Orissa have written to the Prime Minister seeking intervention to clear the Rothmans8217; proposal so that the tobacco farmers in these states could benefit. Before the recent policy change, foreign cigarette makers were allowed to enter India only through the joint venture route with any existing manufacturer.

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The foreign collaborations in cigarette manufacturing are also subject to mandatory dividend balancing clause, whereby the joint ventures have to meet export obligations to balance out the foreign exchange outflow for the first seven years.

BAT Industries formerly British American Tobacco in ITC Limited and VazirSultan Tobacco, Phillip S Morris in Godfrey Phillips India GPI and R J Reynolds with M K Modi are the three foreign players in the country at present.