A TOI report on Monday showed that this $1 difference could lead to a significant bump in the shipment of popular brands like Johnnie Walker Black Label and Chivas Regal into India.
The report suggests that the deal will prescribe a MIP and all bottled Scotch above the threshold will see import duty reduced to 100% from 150%, while those coming in casks could see it halved to 75%. The report says that while the details are still being negotiated, there have been discussions around reducing customs duty on bottled Scotch to 50% over 10 years.
Matter of survival
Domestic players are of the opinion that India should agree to an MIP of $4 a bottle, instead of $5 for every 750 ml bottle. Popular brands like Johnnie Walker Black Label and Chivas Regal’s basic price is just over $4 a bottle. It is believed that would result in a flood of imports from the UK and wipe out several homegrown players and Indian-made foreign liquor (IMFL) brands.
Earlier this year, India’s alcohol industry flagged a 40% increase in whisky imports in the first eight months of this financial year against the full fiscal 2021-22, amid the ongoing India-UK negotiations on a free trade agreement (FTA).
“It is going to cause a lot of damage as domestic players will find it tough to compete and foreign players, who have set up bottling units here, will not add fresh capacity and may go to the extent of reducing capacity, which will hit employment,” a source told TOI.
Even without a reduction in import duty, there has been a surge in bottled Scotch in recent years. Bottled whiskey imports in FY23 more than doubled to $316 million from $152 million while the value of bulk whisky shipments is estimated to have increased by over 40% to around $149 million.
“All the Scotch is coming from the UK, although in several cases, the origin is shown as Singapore and the UAE, given that they are global trans-shipment hubs,” said an industry source. What has further fuelled this is states such as Maharashtra slashing excise duty to 150% from 300% in November 2021, while the levy on domestic produce was kept at 300%.
Levelling playing field?
The two countries have been negotiating a FTA since January 2021 and senior officials of both sides concluded the 11th round of negotiations.
Currently, Scotch whiskey, imported from the UK – both in bottled and bulk – is taxed at around 150 per cent in India. In an interview with PTI, Chivas Brothers’ Chairman and CEO Jean – Etienne Gourgues said if the pact between the two governments is signed, then it would provide liberalisation in tariffs and will be a ‘win-win’ for both India and the UK.
“Our expectation is a fair level playing field between India and the UK. When we export scotch whisky to India, we pay a very high tax of over 150 per cent. When Indian whiskey brands are sold in the UK, there are zero tariffs,” Gourgues told PTI.
Chivas Brothers, a business owned by the French spirits major Pernod Ricard owns several popular single malt and blended Scotch whisky brands, which include Chivas Regal, Ballantine’s, Royal Salute and The Glenlivet.
“We do expect liberalisation on tariffs on two components – first on the imported bottled Scotch, which will give much more choice for the Indian consumers in the small top segment, but as well, liberalisation of the of the tariffs on the bulk, which will encourage the made in India brands and the IMFL in order to keep premiumisation with better Scotch or at a more affordable price,” he added.
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