INDIA
A proposed ban on foreign tobacco investment by the Indian government is threatening Philip Morris’s (PMI) place in the country’s tobacco industry.
According to Reuters, PMI letters dated May and October 2016 to the trade minister and an influential government think-tank said that “the ‘discriminatory’ and ‘protectionist’ proposals would represent a blow to its plans to launch new products and make further investments in India.
Martin G. King, Philip Morris’ Asia president, wrote, “The proposed ban will impact our future investments in India and also force a review of our overall operations, including tobacco crop purchases,” in PMI’s letter on Oct. 13 to NITI Aayog, India’s most influential government think-tank.
India has banned foreign investment in cigarette manufacturing since 2010, but it still allowed tobacco companies to invest through technology collaboration and licensing agreements, or by forming a trading company. The Indian government has been considering over the past year whether to stop these. Before the 2010 ban, PMI formed a new wholesale trading company with Godfrey Phillips India Ltd. and an investment firm. Godfrey manufactures Marlboro while Philip Morris’ trading firm helps promote them.
This part of its operations would not necessarily be impacted by the foreign investment changes being considered, as such changes usually do not apply to previous arrangements. However, if the new rules were implemented, PMI’s future investment plans in India, which include the possible launch of its iQOS heat-not-burn product in this market, would be in jeopardy, as any form of new investment or collaboration would be outlawed.