Federation of All India Farmer Associations (FAIFA) on Friday welcomed a move by the Department of Industrial Policy and Promotion (DIPP) to ban FDI in tobacco sector.
The farmers' body, which claims to represent lakhs of tobacco growers in the country, said that the multinational tobacco companies were using ambiguities in FDI policy to endorse international brands in India, thereby encouraging illegal trade.
"Multinational companies possess the unique competitive ability to switch supply chains globally depending upon currency fluctuations as well as opportunities arising from labour arbitrage.
This does not also make for a stable employment opportunity and value addition in the domestic economy, " FAIFA said in a statement.
"As a result the country today is witnessing a jobless growth in consumption besides significant outflow of foreign currency, " it added.
All the major multnational cigarette companies are willing to invest significant amount of money to strengthen the presence of their brands in the country.
On the other hand, international brands that are sold through legal channels involve payout to the parent company in the form of brand licence fee/royalty involving an outflow of valuable foreign exchange, FAIFA said.
The steep decline in legal cigarette volumes and the consequent reduction in the utilisation of FCV tobacco in cigarette has had a devastating impact on the tobacco farmers in the major Flue Cured Virginia (FCV) growing regions.
It pointed out that Illegal cigarettes do not adhere to Indian laws and regulations.
The Cigarette and Other Tobacco Products Act, 2003 (COTPA) mandates 85 per cent graphical health warning on cigarette packs but illegal cigarettes are available in the Indian market either without health warnings or with small textual warning or warning in a foreign language.