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Kamal Nath hints at duty cuts

Under pressure from the US and EU, India hints that it was open to the idea of reducing customs duties on wines and spirits.

business Updated: Mar 19, 2007 20:24 IST

Under pressure from the US and European Union, India on Wednesday hinted that it was open to the idea of reducing customs duties on wines and spirits.

“India wants to avoid the matter going to the WTO’s dispute settlement body. I hope a solution can be found as the matter is being discussed at the highest level,” Commerce and Industry Minister Kamal Nath said after meeting EU Agriculture Commissioner Mariann Fischer Boel.

Both the EU and US have threatened to move the dispute settlement mechanism of the World Trade Organisation (WTO) over customs duties India imposes on imported wine and distilled spirits.

The effective duty on imported wine and distilled spirits such as whisky range from approximately 150 per cent to 550 per cent.

The US has said in the WTO, India has committed that its tariffs on wine and spirits will not exceed 150 per cent.

“With its fast-growing middle class, India could be an important export market for American wines and distilled spirits if not for these layers of duties. We have raised the issue with the Indian government on several occasions over a number of years. We hope the matter can be successfully resolved in WTO consultations,” said US Trade Representative Susan C Schwab.

Nath said the US had informed India of its decision to go to the WTO with a complaint against India two days ago, while the EU had already filed a complaint.

The minister said while the US and EU were well within their rights to file complaints against India, the Indian authorities were discussing the matter and a solution could be found. He said the reduction could have come in the budget but it could be outside the budget as well.

Nath told Boel that Indian whisky makers were also being discriminated against by the EU, too, which needed to be addressed. The issue has been in the news with Indian liquor manufacturers, including Vijay Mallya’s UB Group, complaining about discrimination.

Boel, however, said Indian whisky could not be sold in Europe as whisky because it is made from molasses, and not grain.

Wine constitutes less than 1 per cent of the entire alcoholic drink market in India worth Rs 8,000 crore. India currently imports 1,20,000 cases of wine a year.

Of this 47 per cent is imported from France and the rest from other countries, including the US, Chile and South Africa.

Industry estimates suggest that the current size of the domestic wine market in India is about 700,000 cases of wine with the potential of reaching 2.8 million cases in the next five years.

In 2005-06, India also emerged as the world?s largest whisky market, selling 60 million cases, according to the Scotch Whisky Association (SWA).

Email Gaurav Choudhary: gaurav.choudhury@hindustantimes.com