Business

FDI Report: Philip Morris Pays Manufacturing Costs To Indian Partner Despite Ban On FDI

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| March 9 , 2019 , 14:16 IST

Philip Morris International Inc and its Indian partner Godfrey Phillips alleged the violation of laws in India, a senior Directorate source told Reuters on Thursday.

The Enforcement Directorate has been looking into both the companies and the scope of the investigation is much broader than the alleged foreign investment law violations highlighted in a Reuters story published on Wednesday, the source said.

Philip Morris has for years paid manufacturing costs to Godfrey Phillips to make its Marlboro cigarettes, circumventing a nine-year-old government ban on foreign direct investment in the industry, Reuters reported based on a review of dozens of internal company documents, which were dated between May 2009 and January 2018.

Three former officials and one former head of the Enforcement Directorate had reviewed the Philip Morris documents for Reuters and said the dealings should be investigated for circumventing India's foreign investment rules.

On Friday, the Enforcement Directorate source declined to comment on whether the ongoing investigation included Reuters reporting findings, but said: "this is already under investigation."

"Both companies are being looked into," said the source, who declined to be named citing sensitivity of the investigation.

Whereas, The Indian government in 2010 prohibited FDI in cigarette manufacturing, saying the measure would enhance its efforts to curb smoking. Restricting foreign investment leaves cigarette manufacturing largely in the hands of domestic players, and is supposed to prevent any foreign-funded expansion.