Government rejects D S Group’s proposal to set up cigarette manufacturing facilities

NEW DELHI: The government has shot down a proposal from D S Group, the makers of Baba zarda and Rajnigandha pan masala, to set up cigarette manufacturing facilities in the country, arguing that the sector is on the banned list and fresh licences will not be issued.

The move, which comes several months after D S Group applied for a licence in a sector, which is one of the last remnants of the licence era, leaves the cigarette market largely in the hands of ITC and Godfrey Phillips, with the former having dominant control over the market.

On December 4, TOI was the first to report that the government was considering the proposal and a decision, sources said, was taken around the same time. "Since it is a banned item, we decided against issuing a licence," said an official involved with the decision.

At the same meeting, the government cleared scores of licences for manufacturing defence goods — the second such exercise since the sector was opened to private players — as well as explosives.

The decision against fresh manufacturing permits comes at a time when the government is considering a series of proposals to restrict manufacture and sale of cigarettes, including an increase in import duty. It has, however, failed to carry through its plan to allow sale of cigarettes only in packaets and ban loose sales, amid intense lobbying by farmer groups from Andhra Pradesh.

In 1991, when the government delicenced a majority of goods, it decided to maintain restrictions on issuing licences for fresh capacity for alcohol and tobacco, where health concerns are high, in addition to a handful of other sectors. In any case, foreign direct investment in the sector is prohibited. Three years ago, Japan Tobacco had exited India, citing the regulatory regime.