New Delhi, 31st July 2023: India’s proposed free trade agreement (FTA) with the UK has aroused worries among domestic whisky producers since it could result in a major increase in the export of popular brands such as Johnnie Walker, Black Label and Chivas Regal.
The trade agreement, which is nearly complete, is expected to contain a minimum import price (MIP) for bottled scotch, as well as lower import duties for both bottled and cask whisky.
A report released by Times of India states that under the proposed FTA, import duties on bottled scotch above the MIP threshold might be reduced from 150% to 100%, while casks could have their duty cut in half to 75%. Although the details are still being worked out, conversations have centred on gradually cutting consumer duty on bottled Scotch to 50% over a 10-year period.
Based on the experience of Australia, where customs duties on wine were reduced under an interim FTA, the home business is lobbying for a 5% MIP for each 750 ml bottle.
However, there are reports that India may agree to a MIP of $4 a bottle, resulting in a deluge of Scotch imports from the UK. Domestic players are concerned that this could lead to the extinction of various homegrown brands and Indian-made foreign spirits (IMFL) goods.
A source quotes by TOI states, “It is going to cause a lot of damage as domestic players will find it tough to compete and foreign players, who have set up bottling units here, will not add fresh capacity and may go to the extent of reducing capacity, which will hit employment.”
Imported spirits currently account for only about 3.3 percent of the total Indian whisky market. However, in the medium and premium segments, classified as whiskies priced over Rs 750 per bottle, Scotch accounts for almost 32% of the market and is rapidly expanding.
According to IWSR, an international body that tracks the alcohol business, Scotch’s market share has increased by five percentage points in the last four years.
Domestic players, on the other hand, have expressed concerns to the government, pointing out that even without a cut in import tariff, bottled Scotch imports have increased in recent years.
It has been observed that all Scotch imports originate in the United Kingdom, however some shipments are advertised as coming from Singapore and the United Arab Emirates, which act as worldwide trans-shipment hubs.
The problem has been exacerbated further by states such as Maharashtra reducing excise duty on imported whiskies from 300 percent to 150 percent in November 2021, while keeping the rate on domestic products at 300 percent. This has fuelled the increase of Scotch imports into the Indian market.
