EU Wines to Get Cheaper as India Willing to Cut Duty

Imported liquor is likely to get cheaper, with the government willing to lower import duty on alcohol from the European Union in return for easier visa norms and greater market access to Indian products there.

India and the European Union (EU) are in the final leg of talks for a free trade agreement. While India is seeking enhanced market access for its textiles and farm products, and more openings for its professionals, the EU wants import duty on its wines and spirits lowered in India, a sticky issue for many years.

"We are open to doing (lowering duty) that provided we get market access in other areas," a commerce department official said. The India-EU bilateral trade and investment agreement, likely to be signed later this year, is expected to give a 30% boost to two-way trade, which now stands at about $75 billion.

In the April-February 2010-11 period, India recorded a 47% increase in import of alcoholic beverages to Rs 482 crore, from Rs 327 crore in the same period of the previous fiscal.

India has been looking for enhanced market access in the EU for its industrial goods, such as chemicals and textiles and garments, where applied duties are as high as 40%-50% for some items. It also wants the EU to do away with quality barriers for farm products and liberalise visa rules for its professional workforce.

The EU's demand for a lower import duty on its wines and spirits in India has been a long-standing one. In 2007, it successfully used the World Trade Organisation (WTO) platform to force India to slash duties on wines and spirits to 150%, from 177% - 550%.

According to the EU, the cut in duties in 2007 to WTO-compliant levels has been negated by state governments raising taxes on liquour, which, in some cases, exceed those on domestic producers.

"While state governments have addressed the problem to a large extent, the EU is still of the view that market access for wine remains poor in many parts of the country," the official said.

A recent report on an on-line market access database maintained by the director-general of trade in the European Commission states that tax legislation on imported wines in Karnataka and Delhi are still discriminatory. It also says rules on wholesale import and retail of imported liquor is still unclear in Tamil Nadu.

"We have asked states not to discriminate against imported liquor, but we cannot ask them not to apply duties, as long as they apply the same on domestically-produced items," the official said.

In an official release, two European wine and spirits exporters' forums -CEEV and CEPS - have sought progressive dismantling of the 150% tariff over a reasonable transitional period. According to CEPS' Jamie Fortescue, European liquor producers do not seek to replace domestic products. "At over 200 million cases, Indian spirits industry is already significant and the country imports less than 1% of that," he said.