India’s Enforcement Directorate is investigating Philip Morris International Inc and its Indian partner Godfrey Phillips over alleged violations of 2010 foreign direct investment (FDI) rules, according to a senior source. The probe centers on payments made between 2009 and 2018 to circumvent a government ban on foreign ownership in cigarette manufacturing.
Internal documents obtained by Reuters in 2019 show Philip Morris indirectly funded Godfrey Phillips’ production of Marlboro cigarettes during this period. The payments occurred after a 2010 regulation prohibited foreign direct investment in tobacco manufacturing, aiming to reduce smoking rates. A former Enforcement Directorate official reviewed these records and stated they warranted further scrutiny.
Philip Morris established a trading company with Godfrey before the 2010 ban, allowing the latter to act as a contract manufacturer while Philip Morris managed branding and distribution. Investigators are assessing whether this structure violated legal frameworks. Both companies have maintained their operations comply with Indian laws.
The Enforcement Directorate declined to confirm if its investigation incorporates findings from the 2019 Reuters report. Godfrey Phillips’ shares rose 2% on Friday despite the probe, according to market data. Penalties for FDI rule violations could reach three times the involved amounts, though no timeline for conclusions has been announced.
