The ongoing negotiations between the UK and India for a free trade agreement (FTA) may see one of the key demands of Britain - duty reduction and gradual zero duty on alcoholic beverages – being accepted by India. At least that is what the Scotch industry, which accounts for over 80% of India's food and beverage imports from the UK, firmly believes.
Imported Scotch currently faces a customs tariff of 150%. The industry, through UK's trade negotiators, is strongly pitching for including Scotch among the list of items that are considered for gradual tariff reduction in the India-UK early harvest FTA deal. The industry is hoping to see the tariff coming down by 50% in the first year, 90% reduction in the third year, and elimination of duty in five years. India currently levies 150% duty.
"UK-India FTA is a big priority for the Scotch industry given it is the second-largest market for Scotch whisky by volume. The current tariff of 150% is extremely high compared to China (5%), Thailand (60%), and South Korea (zero). Since 85% of Scotch exports to India are bulk whisky for India's own booming domestic and export whisky industry, tariff cuts for Scotch offers plenty of scope for local producers in a growing market," Jean – Etienne Gourgues, chairman & CEO at Chivas Brothers, says.
Chivas Brothers is the Scotch whisky division of Pernod Ricard, the leading global player in wines and spirits with consolidated sales of over $9 billion in FY21. India is Chivas Brothers' second largest market by volume (1.6 million 9-litre cases imported in FY21). On the other hand, Pernod Ricard India is the market leader in the bottled-in-India premium and western-style spirit (WSS) segment with popular brands like Royal Stag, Blenders Pride, Imperial Blue and 100 Pipers.
"Cutting tariffs could more than double UK exports of Scotch in five years. We believe tariff cuts for Scotch should be part of any interim (FTA) deal, if one is agreed. Despite fears to the contrary, cutting tariffs would raise the Indian government's revenue. Scotch Whisky Association modelling indicates that reducing Basic Customs Duty would raise an increase of around $4 billion (£3.4 billion) to the Indian government," Thibault Cuny, MD & CEO, Pernod Ricard South Asia & India, said. He also quoted an EY study to indicate that an FTA with India would deliver $170 million annual export gain with zero tariffs within five years of a deal between the UK & India.
Incidentally, the western-style-spirit (WSS) segment is only a fraction of India's alcohol market of 956 million 9-litre cases a year. About 334 million 9-litre cases are of beer; another 341 million 9-litre cases are categorized as country liquor. The WSS segment accounts for 281 million 9-litre cases.
With the UK and India hoping to have an early harvest deal sealed by Diwali, it could be celebration time for high spirits business too.
