The Union Cabinet on Wednesday approved an ordinance for banning production, import, distribution and sale of electronic cigarettes, said finance minister Nirmala Sitharaman.

Cigarette stocks gained up to 5.5 per cent after the Cabinet approved the ordinance.

The ordinance also proposes a jail term for those violating the provisions, the finance minister said. First-time violators will face a jail term of up to one year and a fine of Rs one lakh. For subsequent offences, a jail term of up to three years or a fine of Rs 5 lakh, or both have been prescribed.

Sitharaman, who had headed a Group of Ministers (GoM) on the issue, said the cabinet decided to ban e-cigarettes and similar products as they pose health risk to people, especially the youth.

Union health secretary Preeti Sudan said a debate on whether e-cigarettes and similar products are more harmful than tobacco cigarettes was of little help.

'Why are we debating whether it is more or less harmful...it is a good move to ban it,' she told reporters at the cabinet briefing in New Delhi.

Information and broadcasting minister Prakash Javadekar said it is a preventive step and it is always better to prevent health risks at a later stage of life.

The ordinance will come into force once it is approved by President. It will be converted into a bill in the next session of Parliament.

WIth Sithraman's announcement, shares of Godfrey Phillips India jumped 5.55 per cent and Golden Tobacco climbed 4.69 per cent on the BSE.

Likewise, VST Industries rose by 3.43 per cent and ITC gained 1.03 per cent.