As India and European Union (EU) mone closer to an agreement on trade, local alcoholic beverages makers have sought phased reduction in duties on wines and spirits rather than immediate drastic cut. They also demanded adequate safeguards to prevent misuse of the relaxations in the treaty.
In a letter to the commerce ministry, Confederation of Indian Alcoholic Beverage Companies (CIABC) has said that import duty on bottled products like wines and spirits should be over a period of 10 years. The government can offer to cut duties to 100% from 150 % immediately and then bring them further down to 50% in 10 years. It has suggested similar cuts for bulk wines also.
For bulk spirits, the industry body has recommended an even steeper cut from 150% to 75 per cent right away and gradually bringing them down to 25 % in a decade.
In the FTA with UK finalised recently India has agreed to bring down tariffs on whiskey and gin to 75% from 150% immediately and the further down to 40% after the end of a 10-year period
However, CIABC warned that any tariff concessions must be tightly linked to measures preventing misuse of the FTA through trans-shipment or under-invoicing, especially between the EU and third countries like the UK.
“There is a porous border between Northern and Southern Ireland (Republic Ireland) that provides significant scope for unscrupulous elements to import extra neutral alcohol from the UK and transmit it to India as Gin and Vodka after cosmetic value addition,” it said.
Additionally, there is no customs duty on alcoholic beverages between the EU and UK, and with transportation cost being low, there is ample scope for alcoholic beverage products manufactured in the UK, both in bottles and bulk, being trans-shipped to India, it added.
It also pressed for strict rules of origin and minimum import price (MIP) thresholds to protect the domestic industry from cheap imports of wines and spirits.
“Under invoicing of alcoholic beverages is rampant and the domestic market is already flooded with cheap imported alcoholic beverages being imported at impossibly low CIF (cost, insurance, freight) values of $ 3 or even less per 750 ml bottle. A safeguard against such malpractices is most essential and, therefore, inclusion of the minimum import prices is strongly recommended,” Director General of CIABC Anant S Iyer said.
He strongly recommended imposition of an Minimum Import Price (MIP) of $ 5 per 750ml bottle of wines (similar to trade agreement with Australia) to qualify for any tariff reduction. On bulk wines CIABC has recommended an MIP of $6.70 per bulk litre.