Cheer over Indian drinks duty cut may be short-lived
Thursday, 19 July 2007
NEW DELHI, July 18 (AFP): Cheer over India's move to axe extra duties on alcohol imports may be short-lived as levies by various Indian states could push the price of foreign wines and spirits to new highs, industry officials say.
The European Union suspended Monday its complaint to the World Trade Organisation (WTO) about India's alcohol import tariffs after New Delhi said on July 5 it would reduce the duties.
But already the Maharashtra state government has said it will impose a "special fee" of 200 per cent on the value of imported spirits brands and 150 per cent on wines and champagne to put them on par with Indian- made liquor.
"What we saved at the central level, the states are charging us back. The net effect is going to be price rises for the consumer," said Rajiv Singhal, India representative of French food and beverage promotion board Sopexa.
"It will encourage the parallel economy. Maharashtra has just stopped short of giving special status to the bootlegger," Singhal added, referring to India's vast black market.
Last week's move by Maharashtra state, which is home to India's financial and entertainment capital Mumbai, came after India said it would give state governments the right to levy taxes on imported products equivalent to the duty paid by domestic manufacturers.
Now, industry officials are awaiting the decisions of the governments of Delhi and 27 other states. Delhi and Mumbai together account for about 70 per cent of India's imported spirits and wine market.
India's 1.1 billion strong population and fast-growing middle class represent a huge market for foreign liquor companies which had been hoping a resolution of the WTO dispute would fuel their sales in the country.
"Early indications are that the new (Maharashtra) policy may not be fully compatible with WTO rules," David Williamson, public affairs manager of the Scotch Whisky Association, said from Edinburgh.
"We're still examining the details of the new regime and will be discussing it further with EU and Indian officials," he added. Local producers already pay a 200 per cent tax based on their manufacturing cost whereas international importers previously paid a flat rate of around 200 rupees (5 US dollars) a bottle.
The European Union suspended Monday its complaint to the World Trade Organisation (WTO) about India's alcohol import tariffs after New Delhi said on July 5 it would reduce the duties.
But already the Maharashtra state government has said it will impose a "special fee" of 200 per cent on the value of imported spirits brands and 150 per cent on wines and champagne to put them on par with Indian- made liquor.
"What we saved at the central level, the states are charging us back. The net effect is going to be price rises for the consumer," said Rajiv Singhal, India representative of French food and beverage promotion board Sopexa.
"It will encourage the parallel economy. Maharashtra has just stopped short of giving special status to the bootlegger," Singhal added, referring to India's vast black market.
Last week's move by Maharashtra state, which is home to India's financial and entertainment capital Mumbai, came after India said it would give state governments the right to levy taxes on imported products equivalent to the duty paid by domestic manufacturers.
Now, industry officials are awaiting the decisions of the governments of Delhi and 27 other states. Delhi and Mumbai together account for about 70 per cent of India's imported spirits and wine market.
India's 1.1 billion strong population and fast-growing middle class represent a huge market for foreign liquor companies which had been hoping a resolution of the WTO dispute would fuel their sales in the country.
"Early indications are that the new (Maharashtra) policy may not be fully compatible with WTO rules," David Williamson, public affairs manager of the Scotch Whisky Association, said from Edinburgh.
"We're still examining the details of the new regime and will be discussing it further with EU and Indian officials," he added. Local producers already pay a 200 per cent tax based on their manufacturing cost whereas international importers previously paid a flat rate of around 200 rupees (5 US dollars) a bottle.