Government to Meet Liquor Companies Regarding Scotch Whisky Tariff Dispute

The Indian government will hold talks with liquor companies in connection with the dispute relating to tariff reduction on bulk Scotch imports. According to a Business Standard report, senior officials of the Commerce Ministry will hold this closed-door discussion with senior executives of foreign and domestic liquor companies on Monday. This dispute is linked to the historic trade agreement reached between India and the UK, which came into effect in July.

New Delhi has informed major companies that bulk Scotch imports will not be considered eligible for that tariff reduction, which was lowered from 150 percent to 75 percent as per the agreement. Due to this decision, major foreign companies like Diageo and Pernod, as well as Indian companies, have expressed concern. According to a report by The Economic Times, approximately 80 percent of Scotch imports from Britain are done in bulk, which is used for domestic-level production.

The International Spirits and Wines Association of India, which represents Pernod and Diageo, has privately warned New Delhi that the move to exclude bulk Scotch imports could weaken the trade agreement. In addition, the Confederation of Indian Alcoholic Beverage Companies (CIABC) has also joined this protest. According to a Reuters report, in a confidential letter written to the government on October 27, the CIABC has warned about the impacts on domestic production.

It has been clarified in the CIABC letter that if bulk Scotch used for production in India is not kept eligible for lower tariffs, it could provide an unintended incentive to import finished products. The letter further added that such an outcome would be contrary to the objective of strengthening domestic manufacturing under 'Make in India'. Therefore, companies have demanded the immediate intervention of the government to avoid any kind of disruption.

Members of the CIABC include listed Indian companies such as Radico Khaitan, maker of the 8PM brand, and Allied Blenders & Distillers, maker of Officer's Choice. It was stated by Allied Blenders in an investor presentation this week that they are 'one of the largest importers of bulk Scotch' and the UK agreement will improve the 'affordability of their luxury portfolio'. All companies have stated that they comply with the law.

India's $65 billion alcohol industry had hoped that the tariff reduction would boost business. Scotch whisky tariffs had been a major issue during the years-long India-UK free trade agreement negotiations, in which India finally agreed to halve taxes on certain Scotch imports. Britain has stated that they are working with India on this issue and the Scottish government has also spoken with New Delhi regarding the trade of bulk Scotch. However, no official comment has been made by India on this matter yet.

Import tariff disputes have long been a matter of concern for foreign investors, who are facing massive back tax demands. On the other hand, Indian officials maintain that they are merely enforcing the country's laws. The Commerce Ministry did not comment on the matter after working hours on Saturday.