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UK pushes for sharp tariff cuts on Scotch whisky under FTA.
Oct 28, 2022

While negotiations for the India-UK free trade accord are set to gather pace with Rishi Sunak as the British prime minister, consensus over Scotch whisky tariff appears elusive, with the UK seeking a sharp cut in tariff to 30% over three years in the proposed deal and 75% when the pact comes into effect.

New Delhi has proposed a tariff reduction to 100% in the first year and then cut to 50% in 10 years. India has also likely proposed a minimum threshold of $5 per 750ml on cost, insurance and freight (cif) basis on UK whisky to qualify for concessions under the proposed FTA, sources aware of the matter said.

The Indian industry is also seeking easier entry of Indian whisky into the UK market through the removal of conditions related to the three-year minimum maturation period for all liquor, including whisky that is exported from India. Indian whisky is sold in the UK market as ‘spirits’.

Besides, the UK is also seeking relaxation in the rules of origin for alcoholic beverages while India insists on 40% value addition norms to avail concessional tariff.

While Scotch Whisky will be able to meet the condition, other liquor items may not be able to meet the criteria.

'We have had several rounds of consultations with the industry on various sectors, including alcoholic beverage and are ensuring in the negotiations that the pact benefits them. We are taking into account their views…talks may gather pace with a stable government in the UK,' said a government official.

Indian alcoholic beverage industry is of the view that a 'fair tariff rate' must remain in the range of 100-75% in the near term and 75-50% in the long term, as any rate below this would create a distorted field in favour of imports where the cost advantages would adversely affect Indian industry.

The 150% tariffs on alcoholic beverages by India comprises a 50% basic customs duty and 100% agriculture infrastructure development cess.

The two sides have provisionally closed 16 of the 26 chapters so far. Agreement on subject issues, including tariffs on Scotch whisky and visas, is still awaited.

The new India-origin British prime minister has been vocal about the India-UK trade pact and has supported further easing the British visa regime for Indians.

'As far as we are aware, the British side is seeking a reduction in customs duty on Scotch whisky and other alcoholic beverages from current 150% to 75% immediately and then to 30% in three years’ time,' said Vinod Giri, director general, Confederation of Indian Alcoholic Beverage Companies.

He added that the association has suggested that the duty may be reduced to 100% now and then down to 50% over a 10-year period, all subject to a minimum import price of $5 per 750 ml (at cif) to prevent dumping.

'We are also agreeable with more concessions on whisky imported in bulk and bottled here since that supports some local economic activity in India. But for the deal to work for both sides, we believe that the UK must remove its condition that spirit must be matured for a minimum of three years to be called a whisky because that effectively rules out the bulk of exports from India and is neither supported by Indian laws nor suitable for Indian climate conditions,' Giri said.

Queries emailed to India’s department of commerce remained unanswered till press time.

India and the UK formally launched talks for a free trade agreement in January this year and have so far concluded five rounds of negotiations.

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