While the Finance and Commerce ministries had opposed the Rothmans proposal in its current form, the FTR proposal has been opposed by the Modis of Godfrey Philip India (GPI) in which Philip Morris has a 36 per cent equity stake. It is the Modi note, in fact, which states that FTR is a Philip Morris subsidiary. FTR's application just states that a US-based affiliate has a 35.9 per cent minority interest in GPI and another affiliate has technical assistance with GPI.

Based on the Modis' objection, however, the Industry Ministry is likely to askFTR to furnish a `No Objection Certificate' from GPI, Philip Morris' existing joint venture partner. Under the rules, if a foreign company wishes to set up a wholly-owned subsidiary, it requires permission from its existing joint venture. The argument being used here is that since FTR is a subsidiary of Philip Morris, the same rules apply to it as well.

The Modis have argued that if FTR is allowed to set up a wholly-owned subsidiary, eventually this will lead to Philip Morris withdrawing important brands like Four Square, Red & White, and Cavenders from GPI.

Interestingly, the FTR Holdings proposal, which envisages a foreign equity of Rs 160 crore, is packaged essentially as a technology package, and envisages ``establishing a research and technical services centre to implement programmes with farmers to improve tobacco leaf production in terms of quality and yield...''

It then talks of establishing an international standard tobacco processing plant using proprietary expanded tobacco technology toproduce cut tobacco; to sell cut tobacco products in bulk to licensed manufacturers of cigarettes; to provide marketing, advertising and distribution support to licensed manufacturers of cigarettes; and provide services to India for overseas affiliates of FTR Holding.

In effect, as K K Modi's note to the Industry Ministry points out, the application to make cut tobacco which will be sold to cigarette manufacturers is akin to Coca Cola manufacturing just the concentrate, with the bottling and marketing being done by other companies. Modi's note says that, since FTR is a Philip Morris subsidiary, it has to get a No Objection Certificate from his company, GPI, under the guidelines of the Industry Ministry, Press Note No. 18 of December 18 -- BAT was asked to give such a NoC from ITC and Rothmans gave one from GTC, with whom it once had a joint venture agreement.