Date:29/03/2007 URL: http://www.thehindubusinessline.com/2007/03/29/stories/2007032905151200.htm

Back FDI in tobacco sector: Trade stance flayed

Our Bureau

Guntur March 28 Foreign direct investment (FDI) in the tobacco sector, a proposal accepted by the Union Commerce Minister, Mr Kamal Nath, will usher in major changes and will remove many ills plaguing the sector for years, according to Dr Y. Sivaji, President of AP Virginia Tobacco Growers' Association. "It will immensely benefit the farmer and therefore, the trade's opposition to the proposal is quite understandable," he said in a statement.

Dr Sivaji, who recently led a delegation of farmers to New Delhi to pursue the issue, said Mr Kamal Nath, had given a categorical assurance to the delegation that he was in favour of the proposal and FDI would be allowed in the tobacco processing sector.

According to Dr Sivaji, the Minister had stated in writing that, "FDI up to 100 per cent, with prior Government approval, is allowed in the tobacco processing sector, subject to industrial licensing. Applications, as and when received by the Ministry, will be considered in accordance with the existing guidelines."

He said the Minister had, in fact, committed himself orally that FDI would be allowed even in manufacture of cigarette. "The Prime Minister too was very sympathetic to our cause, and the farmers' delegation also met Mr L.K Advani, BJP leader, and Mr Sitaram Yechuri, CPI (M) leader. Both Mr Advani and Mr Yechuri extended support to our cause. Mr Yechuri said that though his party was opposed in general to FDI in different sectors, he also felt that in the tobacco processing sector it would be beneficial to farmers," he said.

Therefore, the tobacco trade had no right to oppose the proposal. "All along, with the monopolistic situation prevailing in the Indian market, they have been exploiting the farmer, paying him a pittance. Now the Indian trade is in jitters, as it cannot compete with international companies. For instance, Universal Leaf Tobacco buys 2.2 million kg of tobacco on a single platform in a single day in Brazil as against one million kg of tobacco bought on the 22 platforms of Andhra Pradesh in a day. The local trade does not have the muscle to face such competition," he said.

He urged the Union Government and the Union Commerce Ministry to set in place all mechanisms required for allowing FDI in the sector as soon as possible.