Cigarette manufacturers in the country, including ITC Ltd, part-owned by British American Tobacco, suspended production on Friday over the central government's new health warning rules that require companies to use 85 per cent of the surface of cigarette covers for publishing pictorial warning on the ill effects of tobacco use.
Members of The Tobacco Institute of India (TII), who account for more than 98 per cent of the domestic sales of duty-paid cigarettes, said they are unable to continue manufacturing cigarettes for fear of potential violation of rules if they continue production.
The shutdown is effective 1 April 2016, as the new rules mandating 85 per cent of a cigarette pack's surface to be covered in health warnings kicked in after an year's delay.
Cigarette makers failed to comply and the packs continue to have smaller warning that cover 20 per cent of the surface of a cigarette pack.
The Tobacco Institute of India (TII) said the industry was concerned over potential violation of health warning rules by continuing production, although the production halt would cost the industry Rs350 crore (about $53 million) a day.
The government last year delayed enforcement of the new rules requiring stringent pack warnings as a parliamentary panel sought time to assess how the industry would be impacted.
The health ministry later decided to implement the rules from April this year, but the panel last month issued a report saying the size of warnings should be reduced to 50 per cent in the interest of the industry and tobacco farmers.
Health activists have criticised the panel for favouring the industry while the World Health Organisation has called the debate on reducing the warnings size in India "worrisome".
India's $10 billion cigarette market is dominated by ITC and Godfrey Phillips India Ltd, a partner of US-based Philip Morris International.