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India Moves Toward Ban on Loose Cigarettes

FILE - A man smokes a cigarette in a public place in the northern in the state of Uttar Pradesh, India, April 2014.

India moved a step closer to banning the sale of unpackaged cigarettes, with the intention of discouraging smoking in a country where close to 1 million people each year die of tobacco-related diseases.

More than 70 percent of the cigarettes sold in India are loose.

The federal health ministry has accepted the recommendation of an internal panel and will seek cabinet approval before imposing the ban, Health Minister J.P. Nadda told parliament Tuesday in a written statement.

Shares in India's largest cigarette maker, ITC Ltd, fell 5.2 percent on Tuesday. That's its biggest daily drop in five months, and Godfrey Phillips India Ltd lost nearly 9 percent. By comparison, the main Mumbai market index fell 0.8 percent.

As many as 900,000 people in India die annually from tobacco-related diseases, and that number could jump to 1.5 million by 2020, the International Tobacco Control Project estimates.

India is a party to The World Health Organization (WHO) Framework Convention on Tobacco Control, which states that countries “shall endeavor” to prohibit sales of loose cigarettes, which are more affordable for minors.

The panel's recommendation also calls for an increase in the minimum legal age for buying tobacco products and a rise in the penalties for violators. Details on how the government would implement such a ban on single smokes were not disclosed.

Morgan Stanley said the proposed ban was a “clear sentiment negative” for ITC, although implementing it would be difficult. Cigarette companies could introduce smaller pack sizes to cushion the impact of the proposed policy change, it said.

ITC and Godfrey Phillips did not respond to requests for comment.

Prime Minister Narendra Modi's government, which took office six months ago, has been adopting measures to curb India's tobacco consumption. Last month it increased taxes on tobacco products and ordered companies to stamp health warnings across 85 percent of the surface of cigarette packs.