Scotch prices row: India-UK trade deal faces big test as govt calls liquor giants for talks

NEW DELHI: The commerce ministry is set to meet representatives of domestic and international liquor companies on Monday as a dispute over import duties on Scotch whisky threatens to complicate the recently implemented India-UK free trade agreement.The disagreement centres on whether Scotch whisky imported in large quantities for use in domestic manufacturing should receive the same tariff benefits as whisky brought into the country in finished bottles.Under the trade agreement, which came into force in July, India agreed to reduce import duties on certain Scotch whisky products from 150% to 75%.However, the authorities have told major liquor companies that bulk Scotch imports do not qualify for the lower rate.The decision has triggered objections from global spirits companies Diageo and Pernod Ricard, as well as domestic liquor manufacturers, who argue that excluding bulk imports could undermine the benefits of the trade deal.Manufacturers flag concerns over domestic industryThe Confederation of Indian Alcoholic Beverage Companies (CIABC), which represents several major domestic liquor manufacturers, has urged the government to reconsider its position, according to a confidential letter dated October 27 and reviewed by news agency Reuters.The industry body warned that denying the lower tariff to bulk Scotch could make it more attractive for companies to import finished whisky from Britain rather than bring in the spirit in bulk and manufacture or bottle products in India."Such an outcome would run counter to the objective of strengthening domestic manufacturing under Make in India," the letter said, calling for urgent government intervention to prevent disruptions.The CIABC's members include listed companies such as Radico Khaitan, which makes 8PM whisky, and Allied Blenders and Distillers, the maker of Officer's Choice.Allied Blenders said in an investor presentation this week that it is “one of the largest bulk Scotch importers” and that the UK trade agreement would improve its “luxury portfolio accessibility”.Around 80% of Scotch whisky imported from Britain by volume arrives in bulk and is used in the production of popular brands in India. The country's $65 billion alcoholic beverages industry had expected the reduction in import duties to support business.Diageo and Pernod Ricard also raise objectionsThe International Spirits & Wines Association of India, which represents companies including Diageo and Pernod Ricard, has privately cautioned New Delhi that excluding bulk Scotch from the tariff concession could undermine the trade agreement.The two companies have commercial interests in India's spirits market, where imported Scotch is used both in finished products and in domestic manufacturing.The CIABC's intervention has widened the dispute, bringing domestic manufacturers into the same debate as major international spirits companies.The companies and industry bodies did not respond to Reuters' requests for comment. All the firms have said they comply with the law.Dispute puts trade agreement under scrutinySenior Commerce Ministry officials are expected to hold closed-door discussions with executives from domestic and foreign liquor companies on Monday, according to four people familiar with the matter.The ministry did not immediately respond to a request for comment outside regular business hours on Saturday.The dispute marks the first major disagreement linked to the India-UK trade agreement, following years of negotiations in which tariffs on Scotch whisky were a key sticking point.Britain has said it is working with India to resolve the issue, while the Scottish government has also raised concerns with New Delhi over the treatment of bulk Scotch imports, news agency Reuters had previously reported.You use AI every day. Now get your AI Quotient. Take the AIQ test.