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

NEW DELHI: 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' 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. After the Reuters report was published, a senior official at India's main financial crime-fighting agency, the Enforcement Directorate, said Philip Morris and Godfrey were being investigated for alleged violations of the country's laws. The scope of the investigation, the source added, was much broader than the issues highlighted in the Reuters story.

"We remain available to discuss this matter further with the appropriate regulatory authorities," Venkatesh said in his e-mail to Reuters on Wednesday.Philip Morris paid Godfrey for items ranging from large cigarette-making machines to costs of smaller equipment such as barcode scanners and printers deployed in Godfrey's factories, the Reuters review of documents found.

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