India-UK FTA: Int'l premium spirits to be more accessible but benefits may be limited, say experts

New Delhi, Jul 24 (PTI) The India-UK free trade agreement will reduce duties on imported spirits, making premium international options more accessible to Indian consumers, according to industry players, but experts cautioned that the benefits may be limited as the maximum price reduction could be only up to Rs 300 per bottle.

As per the FTA signed in London between the two governments, India is reducing duty on UK whisky and gin from 150 per cent to 75 per cent and further to 40 per cent in the tenth year of the deal.

"Whisky producers will benefit from tariffs slashed in half, reduced immediately from 150 per cent to 75 per cent and then dropped even further to 40 per cent over the next ten years - giving the UK an advantage over international competitors in reaching the Indian market," as per an official statement of the UK government.

Reacting to the development, the International Spirits and Wines Association of India (ISWAI), which represents premium alcoholic beverage companies in India (mostly MNCs), hailed it as a historic moment for the alcobev sector and paves the way for a more balanced and equitable trade environment.

"The deal will significantly benefit Indian consumers, as premium international spirits will become more accessible, thereby accelerating the ongoing trend of premiumisation. It will also stimulate growth across ancillary sectors, such as hospitality, tourism, and retail, while potentially increasing the revenue for Indian states," ISWAI CEO Sanjit Padhi said.

Diageo India MD and CEO Praveen Someshwar said: "We laud the Indian and British governments for formalising this historic treaty, which will boost bilateral trade and positively impact the accessibility of premium Scotch whisky in India, reigniting growth and increased choice for Indian consumers".

Chivas Brothers Chairman and CEO Jean-Etienne Gourgues termed the India-UK FTA as "a sign of hope in challenging times for the spirits industry".

"India is the world's biggest whisky market by volume, and greater access will be an eventual game changer for the export of our Scotch whisky brands, such as Chivas Regal and Ballantine's," Gourgues noted.

Industry experts, however, opined that while companies could benefit end-consumers, there would be very few benefits in terms of price reduction.

"Consumer prices for imported Scotch (whiskey) are not likely to change much. Most of the taxes on alcohol sit in states, and even if all customs duty reduction is passed on, the impact on consumer prices of imported Scotch whiskies will be in the range of Rs 100-300 per bottle," liquor industry expert Vinod Giri said.

Since price segments in whisky are currently too wide, this much reduction is not going to win any new consumers, and hence companies are likely to instead pocket the savings, he added.

Moreover, with the FTA in place, there is a likelihood that over the next few years, the bottled-in-India (BII) Scotch whiskies category, where Scotch is imported in bulk for bottling here using local packaging material, would be replaced by direct imports.

Brands, including Black Dog, 100 Pipers, Passport, Vat 69 and Black & White, are imported in India and then bottled here to save tax.

"With falling customs duty, the entire rationale of packaging locally to save duty goes away, and it would make more commercial sense for companies to produce in Scotland at lower cost and export to India rather than go through the hassle of setting up and running a bottling plant in India. Consumers may see a marginal drop in prices but not enough to affect most Indian whiskies," he said.

Confederation of Indian Alcoholic Beverage Companies (CIABC), an industry body of IMFL manufacturers, said the lowering of import duty on Scotch will help the domestic industry, as it will help to reduce the cost of blended products, but expressed concern that over possible 'dumping of Scotch whiskey brands', which have been bottled in India before the FTA.

"We hope that the government will ensure that Scotch whisky and other spirits (BIO - bottled in origin) are not dumped at low import prices or routed through any other country at cheaper rates, which would hurt the YOY growth of premium and luxury Indian brands," CIABC Director General Anant S Iyer said.

He also suggested "imposition of a minimum import price (MIP) on BIO products" by the government to safeguard the domestic industry. PTI KRH RKL KRH BAL BAL