India to hold Monday talks with liquor firms as domestic giants join bulk Scotch tariff dispute
India's commerce ministry will meet foreign and domestic liquor executives on Monday after Indian manufacturers joined Diageo and Pernod Ricard in protesting the exclusion of bulk Scotch imports from the UK trade pact's tariff cut.
India's government will hold closed-door talks with liquor companies on Monday after domestic manufacturers joined foreign spirits giants in protesting against a federal investigation into bulk Scotch whisky imports, Reuters reported on Saturday. The meeting will bring senior commerce ministry officials together with executives from both Indian and international firms, according to four people with direct knowledge of the plans.
The dispute is the first major test of the historic India-United Kingdom trade pact that came into force in July. Under that agreement, India agreed to cut the import duty on certain Scotch whisky products from 150 per cent to 75 per cent, a concession that was welcomed by distillers in Scotland and by India's own drinks industry. New Delhi has now told major companies, however, that whisky shipped in bulk does not qualify for the lower rate.
That distinction matters because most of the Scotch that reaches India does not arrive in bottles. Around 80 per cent of Scotch whisky imports from Britain by volume are shipped in bulk and then used in India to make popular local brands. India's alcohol industry, valued at about $65 billion, had expected the tariff cut to ease costs across that supply chain; instead, the investigation has raised the prospect that the concession will apply only to a minority of imports.
Foreign producers were the first to object. The International Spirits and Wines Association of India, which represents Pernod Ricard and Diageo, privately warned New Delhi that excluding bulk shipments could undermine the trade pact itself. The companies have also been told, in earlier Reuters reporting, that bulk imports are not eligible for the reduced tariff, a position that has alarmed an industry built around blending and bottling imported spirit in India.
What is new in Saturday's report is that domestic firms have now joined the protest. The Confederation of Indian Alcoholic Beverage Companies, which represents leading Indian manufacturers, raised the issue in a confidential letter to the government dated 27 October, which Reuters is reporting for the first time. The letter warned that denying the lower tariff to bulk Scotch would hit domestic manufacturing, and it urged urgent intervention to avoid disruption.
The confederation's argument is that the policy could backfire on its own aims. If bulk spirit remains subject to the full 150 per cent duty while finished whisky qualifies for the lower rate, companies would have an incentive to import finished products from Britain rather than bring in spirit in bulk and manufacture or bottle it in India. That outcome, the letter said, would run counter to the government's Make in India objective of strengthening domestic manufacturing.
The group's members include some of the biggest names in Indian whisky. Radico Khaitan, maker of the 8PM brand, and Allied Blenders and Distillers, maker of Officer's Choice, are both members, and neither responded to queries from Reuters. Allied Blenders said in an investor presentation this week that it is one of the largest importers of bulk Scotch and that the UK pact would improve access for its luxury portfolio, underscoring how much domestic firms have riding on the interpretation of the deal.
Whisky tariffs were one of the most stubborn sticking points during years of negotiations over the India-UK agreement, and the eventual deal to halve duties on certain Scotch imports was presented as a landmark win for both sides. Britain has said it is working with India on the current disagreement, and the Scottish government has raised the treatment of bulk imports with New Delhi. India itself has not commented publicly on the matter, and the commerce ministry did not respond to a request for comment outside regular business hours on Saturday.
The row also sits in a longer history of friction over import duties in India. Tariff disputes have long been a sore point for foreign investors, several of whom have faced demands for large amounts of back tax, while Indian officials maintain that they are simply enforcing the law of the land. For the spirits industry, the question is whether the authorities' reading of the pact reflects its intent, or whether the concession was meant to cover the bulk trade on which the Indian market largely depends.
Monday's meeting will be the first chance to test whether a compromise is possible. Executives will be looking for clarity on whether bulk shipments can be brought within the lower tariff, or at least for a timetable for resolving the investigation. If the talks fail, the dispute could cast a shadow over one of the flagship achievements of the new trade pact, with consequences for distillers in Scotland, bottlers and workers in India, and consumers who had expected the deal to bring prices down.
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