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Philip Morris says Indian partner charges machinery costs; calls it 'business expense'


Added 03-14-19 01:03:01am EST - “Philip Morris International Inc's Indian partner charges machinery-related ...” - Reuters.com

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Posted By TheNewsCommenter: From Reuters.com: “Philip Morris says Indian partner charges machinery costs; calls it...”. Below is an excerpt from the article.

NEW DELHI (Reuters) - Philip Morris International Inc’s Indian partner charges machinery-related costs for manufacturing its Marlboro cigarettes in India, the company said on Wednesday, following a Reuters article that showed it may have circumvented foreign direct investment rules.

Philip Morris has for years paid manufacturing costs to Godfrey Phillips, despite a nine-year-old government ban on foreign direct investment in the industry, Reuters reported last week, based on a review of dozens of internal company documents dated between May 2009 and January 2018. (reut.rs/2NIlHD8)

India prohibited foreign direct investment in cigarette manufacturing in 2010. Ahead of the ban, Philip Morris formed a new wholesale trading company with Godfrey in 2009, and the two sides signed a procurement agreement.

Philip Morris’ director for corporate affairs in India, R. Venkatesh, said on Wednesday that under that agreement Godfrey “manufactures Marlboro cigarettes and recharges any costs related to special machinery for the manufacture” of those cigarettes to the global tobacco giant’s Indian unit.

“This recharge is simply a business expense,” Venkatesh told Reuters by e-mail, adding that the arrangements were in “full compliance” with Indian regulations.

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