Industry
Send Scotch in barrels please, India tells UK
Summary
- Bottled whisky may not find place under India-UK FTA
India is not keen to include bottled whisky under the proposed free trade agreement (FTA) with the UK, but it may allow import of Scotch whisky in big barrels that can be bottled within the country, two government officials aware of the matter said.
This is being considered since some foreign liquor companies are under-invoicing bottled whisky while importing and then selling them in India, the officials said on condition of anonymity. Currently, India imposes tariffs as high as 150% to discourage imports of alcoholic beverages, including whisky.
“There have been issues with under-invoicing when it comes to bottled whisky, hence the decision that you can bring it in barrels and bottle in India," said one of the two officials cited above. Alcohol brought in barrels is used for blending and bottling, reducing the possibility of under-invoicing, they said.
The officials added that India’s stand was separately conveyed to a UK minister early this month.
India and the UK have held 14 rounds of negotiations for the FTA, and both sides are keen to conclude the agreement. “The thinking is to announce the FTA between the two countries before the elections are announced since a lot of discussions have already happened," said the second official. India’s general election is likely to be announced in March.
A commerce ministry spokesperson didn’t respond to emailed queries. Text messages and emails sent to commerce secretary Sunil Barthwal also remained unanswered till press time.
There have been allegations of rampant under-invoicing in imported alcohol by foreign distillers, and the Indian tax department has sent notices to some of them in the past, which have been challenged.
“There are certain concerns Indian players have, which have resulted in high tariffs for imported whisky. There are also revenue considerations from the government’s side," said Biswajit Dhar, a trade expert and professor at the Centre for Economic Studies and Planning at Jawaharlal Nehru University. “So, the government’s idea of bringing down the tariffs on bulk whisky imports by barrel is probably taken with the view of getting the FTA through. But this may not address the concerns of the domestic players and revenue implications faced by the government."
When contacted, Vinod Giri, director-general of ]the Confederation of Indian Alcoholic Beverage Companies (CIABC), said the body has already made its recommendations to the government.
“The government has been provided all necessary information and data to take decisions on the matter. We had also made our recommendations that propose a tax reduction on bottled liquor from current 150% to 100% now and then to 50% over a period of time. For bulk spirits, we have suggested (a tax reduction) from 150% to 75% now and then to 25% over time. However, we believe that this must be reciprocated by the UK by removing their non-tariff measures related to maturation," Giri said.
On the issue of maturation, the UK is asking for a maturity age of three years for a spirit to be classified as whisky. However, Indian makers have argued that with weather conditions being hotter here, they will lose more than one-third of the whisky due to this condition, and have sought the maturation period to be 18 months.
One of the people cited above said that after the FTA with Australia, the duty on imports of wines was reduced from 150% to 100% , which would be reduced to 50% over 10 years. “We are asking for same terms in other FTAs," the person added.
Earlier, as part of the discussions, the UK had suggested a proposal of ‘bottling in transit’. This meant that the product would be exported from the UK to a third country—perhaps in the European Union—where it would be bottled and then sent over to India.
The proposal was not accepted since a major concern around FTAs is the possibility of third countries shipping goods to India via those that are their treaty partners, to take advantage of the treaty benefits.
For Scotch whisky, India stands at No. 5 in the world by value of sales. In 2022, sales of Scotch whisky in India increased by 93% to $340 million, according to industry data. Scotch, however, accounts for just 2% of all whiskies consumed in India. The overall whisky market in the country is expected to cross $22 billion by 2027.
