NEW DELHINEW DELHI (Reuters) - India's health ministry has proposed a ban on the production and import of electronic cigarettes, documents seen by Reuters showed, potentially jeopardizing the expansion plans of big firms like Juul Labs and Philip Morris International.

The ministry has proposed that the government issue an executive order banning the devices in the public interest, saying it was needed to ensure e-cigarettes don't become an "epidemic" among children and young adults.

"E-cigarettes and similar technologies that encourage tobacco use or adversely impact public health are hazardous for an active as well as passive user," the health ministry said in an internal note seen by Reuters that the federal cabinet is expected to consider.

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Health officials are proposing jail terms of up to three years, with a penalty of up to 500,000 rupees ($7,000), for repeat offenders against the new rules, according to a draft of the executive order.

First-time offenders would face a prison term of up to one year and a fine of 100,000 rupees.

Such orders are typically issued in India as an emergency measure when parliament is not in session. It can lapse if it is not approved when lawmakers convene against in the next session, which will most likely be held around November.

It was not immediately clear whether the draft executive order will face changes, or when it will be approved.

India's health ministry did not respond to a request for comment from Reuters.

The ministry's plans would deal a blow to U.S.-based Juul Labs Inc, which is hoping to launch its e-cigarette in India and has hired several senior executives in recent months.

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Philip Morris also has plans to launch its heat-not-burn smoking device in India, Reuters has reported.

Advocates for the devices say e-cigarettes are far less harmful than smoking tobacco, because users do not inhale the same dangerous matter.

But many tobacco-control activists are opposed to e-cigarettes, saying they could lead to nicotine addiction and push people to consume tobacco.

"There is evidence that these products are a gateway to tobacco products and induce adolescents and young adults to nicotine use leading to addiction," the health ministry said in the document.

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India has 106 million adult smokers, second only to China in the world, making it a lucrative market for firms such as Juul and Philip Morris. More than 900,000 people die each year in the country due to tobacco-related illnesses.

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Sixteen state governments in India have prohibited e-cigarettes but there is as yet no federal legislation to deal with what the health ministry termed the "hazardous product".

Justifying its call for a ban, the health ministry argued that e-cigarettes can also be used as delivery devices for other substances such as cannabis, and could promote dual use with conventional cigarettes.

"These devices are injurious to health and proliferation of these products has a negative impact on public health," the draft said.

Reuters reported in March the health ministry had called for Juul's entry into India to be blocked, saying such products were "addictive and could potentially undermine our tobacco control efforts".

Juul, whose sleek vaping devices that resemble USB flash drives have become a sensation in the United States, has previously said it aims to improve the lives of smokers by offering a "satisfying alternative to combustible cigarettes".