Earlier this week, Secretary of State for Health Andrew Lansley said he wanted to "look at the idea of plain packaging". Last year the proposal was defeated in a Commons vote.
However, in a U-turn on the idea it now appears that the proposal could resurface as a vital crutch of a "radical" new Health White Paper to be launched in December.
Speaking ahead of its launch, Lansley said that it was "wrong that children were being attracted to smoke by glitzy designs on packets".
However, tobacco industry sources claim that plans for both plain packaging and a display ban "cannot and most likely will not" co-exist.
"It's likely that the government will trade-off the deeply unpopular plans for a costly and disruptive tobacco display ban for plain packaging instead," one source said.
Association of Convenience Stores (ACS) said that there was "no sense" in both bits of legislation working together.
"There would be absolutely no point in covering up displays of plain packets," public affairs director Shane Brennan said. The ACS is calling for immediate clarification on the issue.
However, the Tobacco Manufacturers Association (TMA) questioned the legality of plans for plain packaging.
"Moves to prevent tobacco companies from exercising their intellectual property rights would place the government in breach of legal obligations relating to intellectual property, international trade and European law," TMA chief executive Chris Ogden said. It would also exacerbate the illicit trade by making packs far easier to counterfeit, he added.
News of the ban plan's shaky status came as the health lobby's latest attempt to influence its implementation backfired spectacularly.
A report funded by Cancer Research UK claimed that a display ban in the Republic of Ireland had resulted in a number of public health benefits, when in fact the study actually showed an increase in youth smoking since it was implemented in July 2009.
EU rebuffed as c-stores cling on to hopes for display ban u-turn (13 November 2010)
Tobacco display ban to be delayed (11 November 2010)
Campaign to stop tobacco display ban hits the target (29 October 2010)
Cash in: Tobacco - making headlines around the world (15 October 2010)