India's top court tells tobacco industry packs must carry bigger warnings

* India's top court grants no stay on tobacco packaging rules

* Pleas challenging new rules to be heard by a state court

* Tobacco industry calls new rules impractical

* Shares (Berlin: DI6.BE - news) of cigarette manufacturers fall after court order (Adds quotes, context, shares)

By Aditya Kalra

NEW DELHI, May 4 (Reuters) - India's Supreme Court on Wednesday said the tobacco industry must adhere to federal rules requiring stringent health warnings on cigarette packs, in a major setback for the $11 billion industry that opposes the new policy.

The court also turned down an industry plea to stay the implementation of the new tobacco-control rules introduced from April 1, which require health warnings to cover 85 percent of a cigarette pack's surface, up from 20 percent earlier.

The tobacco industry "should not violate any rule prevailing as of today," the two-judge bench said during the 45-minute hearing inside a packed courtroom in New Delhi.

It (Other OTC: ITGL - news) also directed the high court of Karnataka state to hear dozens of pleas filed against the new rules in several Indian courts and decide on the matter within six weeks.

Last month, Indian tobacco companies, some backed by foreign "Big Tobacco", briefly shut down production as the new rules came into effect. The industry says the new policy is impractical and says it will boost cigarette smuggling.

But the government still backs the rules that are aimed at reducing tobacco consumption. Ranjit Kumar, solicitor general of India, told the court New Delhi was committed to the new rules and opposes any stay on their implementation.

The Supreme Court declined an industry lawyer's request that a stay obtained by a lower court be allowed to continue.

Shares in India's biggest cigarette maker ITC Ltd (BSE: ITC4.BO - news) , part-owned by British American Tobacco, fell nearly 1 percent after the court directive. U.S (Other OTC: UBGXF - news) .-based Philip Morris International's India partner Godfrey Phillips pared gains but was trading 1.3 percent higher.

Officials from the Tobacco Institute of India, an industry lobby group whose members include ITC and Godfrey, were not immediately available for comment.

It was not immediately clear when the companies will start printing bigger warnings on their packs.

Smoking kills more than 1 million people a year in India, according to BMJ Global Health. The World Health Organization says tobacco-related diseases cost India $16 billion annually. (Editing by Douglas Busvine and Simon Cameron-Moore)