India has 106 million adult smokers, second only to China in the world, making it a lucrative market for companies producing vaping products.
India banned the production, import and sale of electronic cigarettes on Wednesday, a public health decision that will dash the expansion plans of companies such as Juul Labs and Philip Morris International in the country.
The ban will be imposed through an executive order and will include jail terms of up to three years for offenders. It was not clear whether the use of such products would be prohibited.
India's health ministry, which proposed the ban, said it was needed to ensure e-cigarettes don't become an "epidemic" among children and young adults.
"Considering the seriousness of the impact of e-cigarettes on the youth, the cabinet has approved an ordinance to ban e-cigarettes," Finance Minister Nirmala Sitharaman told a news conference.
India has 106 million adult smokers, second only to China in the world, making it a lucrative market for companies making vaping products such as US-based Juul as well as Philip Morris which manufactures a heat-not-burn tobacco device.
While announcing the ban, Sitharaman showed various types of products to the media, including a Juul vaping device, which resembles a USB flash drive.
Juul had plans to launch its e-cigarette in India and hired several senior executives in recent months. Philip Morris also has plans to launch its heat-not-burn smoking device in India.
Vaping body attacks ban
The ban order needs to be approved by the president before it takes effect, but this is typically a formality.
Advocates for e-cigarettes say vaping is far less harmful than smoking tobacco. But many tobacco-control activists are opposed to the devices, saying they could lead to nicotine addiction and push people towards consuming tobacco.
More than 900,000 people die each year in India due to tobacco-related illnesses.
The Association of Vapers India, an organisation that represents e-cigarette users across the country, attacked the government's decision, saying it would deprive millions of smokers of a safer solution to cut back on smoking.
Shares in ITC, India's top cigarette maker, ended up nearly 1 percent, while its rival Godfrey Phillips surged 5.2 percent. E-cigarettes form just a tiny part of their product range.
The ban order will impose a jail term of up to one year and a fine of $1,404 (100,000 rupees) for first-time offenders.
A repeat violation would attract a jail term of up to three years and a penalty of up to 500,000 rupees, the government said.
The ban would apply to the manufacture, import, sale, advertisement and distribution of e-cigarettes.
Such executive orders are typically issued as an emergency measure when Indian parliament is not in session. The ban order could lapse if it is not approved when lawmakers convene against in the next session of parliament, which will most likely be held in November.