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Image Courtesy: Winnington AB
 
A business daily published an interview-based news story headlined ‘DS group acquires Swedish tobacco company’ on 28th November 2014. It quoted DS Group Vice-Chairman  Rajiv Kumar as saying that the 50% stake purchase in Winnington AB was aimed at coming out with the next-generation tobacco products. These would be healthier and safer because of their processing quality.
Mr. Kumar stated: “We are working on some interesting blends. Initially, these products are aimed at the European market. We may come up with new products in the future for the Indian market.”
Mr. Kumar did not foresee that there would be no takers for such ‘Make in India’ offers in the Modi Government. Four days after this news was published, the Modi Government rejected Dharampal Satyapal Limited’s (DSL’s) application for industrial licence to set up a cigarettes factory at Guwahati in Assam. The Congress-led UPA Government had kept DS Group's hope for foray into cigarette manufacture live by deferring twice a decision on the company's application dated 28th September 2012. 
All these years Assam Government, where the Congress Party is power, on other hand, refrained from giving its comments on DSL's application. The company proposed a Rs 352.21-crore project to manufacture 25,000 million cigarettes per annum and to create employment for 2859 persons. It appears the legendary Mon (Silence) posture of ex-PM Dr. Manmohan Singh (Rajya Sabha member from Assam) had a rub-off effect on State Government!
At a meeting held on 2nd December 2014, an inter-ministerial panel named Industrial Licensing Committee (ILC) decided to reject tersely the application in keeping with the unflinching opposition against the application from the Department of Industrial Policy and Promotion (DIPP's) Consumer Industry Division (CID). 
Under UPA regime, ILC first considered the application on 9th October 2013 and deferred a decision. It advised CID to re-examine its stance against grant of fresh licences for manufacture of cigarettes, according to official sources. 
They quoted the minutes of this meeting as stating “it was noted that import of cigarettes was allowed under OGL (open general licence). In view thereof, the Chairman directed that the case be re-examined by Consumer Industry Division.”  
In a memorandum dated 21st November, 2013, CID stated that it has re-examined the case and reiterated that “no industrial licence has been granted for manufacture of cigarettes since 1999, on grounds of health.” Moreover, the Cigarettes and other Tobacco Products (Prohibition of Advertisement and Regulation of Trade and Commerce, Production,  Supply and Distribution) Act (COPTA), 2003 envisages progressive restrictions on sale of cigarettes and other tobacco products for improving public health.   
CID had also contended that the present import regime is extremely protective to domestic manufacture as there is deterrent import tariff of as high as 60% ad valorem per thousand units (Tu) of cigarette sticks. The present excise duty on cigarette, on the other hand, is as low as 16% per Tu, “which may cause easy availability and raise in consumption of cigarettes and related products.”
Like CID, Department of Economic Affairs (DEA) stuck to its opposition against consideration of proposal for grant of industrial licence for cigarette manufacture. 
ILC took note of CID's re-considered stand on the application at its meeting held on 16th December 2013. As put by the minutes of this meeting, “After deliberations, it was  decided that the case may be re-examined by Consumer Industry Section with a view of domestic production and import vis-a-vis demand of (for) cigarettes in the country.  Accordingly, it was decided to defer the case.”
Following this direction, CID consulted Tobacco Board, the Tobacco Institute of India, cigarette companies and Department of Commerce on issue of domestic manufacture versus imports. Tobacco Board's data shows that the consumption of cigarettes declined 3.17% in 2012-13 as compared to preceding year. 
As regards foreign trade, CID has noted the trend of increase in cigarette exports and fall in domestic production. It has thus called for “maintaining the status quo of the present position with regard to grant of fresh licences of the product, especially so when imports are low and decreasing and there is no trend available showing a pressing need in the present demand for cigarettes.”
In a memorandum dated 28th October 2014, CID reiterated its earlier opposition as communicated to ILC in October 2012 and November 2013.  
Reverting to DS Group's tie-up with Winnington AB, the Swedish company's website carries a release dated 12 February 2014, announcing the partnership between the two companies. 
The release says that the Indian multi-group Dharampal Satyapal Group (DS Group), a constantly growing and diversified group with a turnover of approximately EUR 5 billion in  December 2013 acquired a stake in Swedish Winnington AB - a collaboration that both parties looked forward to for a long time. 
According to the release, Winnington's founder Lars Björkholm is already a famous entrepreneur, mainly as a challenger of the Swedish tobacco monopoly with the first snusuppstickarprodukten Gustavus. He has since launched other successful innovations, one of which is energy snuff KickUp.
With the rejection of DSL's application, Rajiv Kumar would not be able to replicate Björkholm's challenge in India.  Three puffs for Indian dominant cigarette maker, ITC!
 
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