Maha, Goa may help India fix wine row with EU

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New Delhi, Jul 10 : In what could be the last lap in resolving the ongoing dispute between the European Union (EU) and India on the latter’s relatively high tariffs on foreign liquor, the Centre has called an important meeting with the representatives of the European wines and spirits industry to find out the details regarding, “discrimination” they are allegedly facing in several states.

Meanwhile in another significant development, Maharashtra and Goa—two of the major liquor markets in the country—have agreed on according national treatment to European companies in this regard to save India from being dragged to the World Trade Organisation dispute settlement body by the EU or even the US. If accorded national treatment, EU/US companies would be treated on par with the local firms on tariffs and other rules.

Alleging that Maharashtra and Goa, in particular, maintained high duties on wine and spirits from Europe, the EU had threatened once again to take India to the WTO. The EU has been pressing for national treatment to its wine and spirits companies in India as per the WTO rules.

Maharashtra has imposed an additional excise duty of 200% on wine and 150% on spirits. The local wine manufacturers are exempt from excise duty, at least till 2011, according to the 10-year policy effective from 2001. Incidentally, Mumbai accounts for around 40% of wine consumed in the country.

Maharashtra has conveyed to the Centre that it would shortly come up with a new duty regime on liquor that would assuage the concerns of countries like the US and even those in the EU, sources said. Goa, whose high tariffs were also taken up by the EU with the Centre, has also agreed to bring it down, the sources added. A meeting between the Centre and the two states in this regard would be convened soon to formalise the final duty structure, they said. “We are hopeful that this issue will be sorted out soon,” a senior official said.

Pointing out that the Centre, on July 3, 2007, had taken off 150% additional import duty on foreign liquor including wine and spirit, a senior Central government official said the Centre would now try to find out the norms that was hurting EU liquor exporters. These additional duties, in lieu of state duties, were scrapped by the Centre to comply with India's WTO commitments. However, foreign liquor continues to be costly due to high state-level excise duties.

Following the Centre’s decision on July 3, 2007, the EU, had on July 13, 2007, suspended its complaint to the WTO dispute settlement body. This was accepted by the WTO on July 16, 2007. “If they (the EU) want to go again to the WTO, they would have to consult us before that. But we are being proactive here and would hold talks with their liquor industry representatives that would include leading wine and scotch whiskey makers,” the official said.

The Centre now wants to know from the European liquor companies if they are facing discrimination in different states regarding the slab system of duties or in the manner of collection of such levies, or if it is even in norms regarding licensing, vending, labelling warehousing or transportation.

In a bid to make transactions smoother for liquor companies, attract more domestic and foreign companies into the over $11 billion (by sales) liquor market and also to curb smuggling of the item, the Centre is also considering a proposal for a nation-wide uniform tax structure on liquor as opposed to the present situation of around 30 dissimilar duty regimes in various states.

Meanwhile, Karnataka also hiked duties on spirits in April this year. The new excise duty structure in Karnataka at the rate of 200% for spirit brands. India sells about one million cases of wine a year—that is expected to double by 2011.