NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Tuesday, January 17, 2017

Philip Morris International is fighting to keep a toehold in India’s $11 billion tobacco market, as the government considers further tightening foreign investment rules in the sector, according to documents seen by Reuters.

In previously unreported letters from Philip Morris to the trade minister and an influential government think-tank, the U.S.-based company said the “discriminatory” and “protectionist” proposals would represent a blow to its plans to launch new products and make further investments in India.

The two letters dated May and October last year followed local media reports of a possible change in government policy. While the warnings may be part of the firm’s negotiations, they show the level of concern the proposals are causing.

“The proposed ban will impact our future investments in India and also force a review of our overall operations, including tobacco crop purchases,” Martin G. King, Philip Morris’ Asia president, wrote on Oct. 13 to NITI Aayog, India’s most influential government think-tank that has a say in federal policies, including those related to foreign investments.

India banned foreign investment in cigarette manufacturing in 2010, but it still allowed tobacco companies to invest through technology collaboration and licensing agreements. Investments could also be made by forming a trading company.