In the ongoing free trade agreement (FTA) negotiations between India and the European Union, a key area of focus has emerged: the alcohol industry. The ninth round of talks, which began today, could potentially see significant changes in import duties on European alcohol in India.
Duty on European Alcohol May Drop to 50% in 10 Years
Currently, European whisky and other alcoholic beverages face a hefty 150% import duty when entering India. However, sources suggest that India might agree to gradually reduce this duty to 50% over the next decade. This would involve an annual reduction of 10%, a move that would make European alcohol more affordable in India and could benefit consumers looking for premium whisky from Europe.
India Seeks Relaxation for Indian Whisky in Europe
In exchange for lowering the import duties, India is pushing for some concessions on its own alcohol exports to Europe. At present, Europe requires Indian whisky to be aged for at least three years before it can be recognized as whisky. For brandy, the aging requirement is one year. India argues that due to its warmer climate, whisky and brandy mature faster, and as a result, the current European aging rules drive up production costs by 30-35%. India wants Europe to relax these aging requirements to help Indian whisky gain better access to the European market.
Other Key Areas of Discussion
While the alcohol industry has garnered significant attention, other sectors are also part of the free trade discussions. India is looking for concessions on its textile, garment, and service exports to Europe. Meanwhile, Europe is seeking reduced tariffs on chemicals and other products sent to India. Additionally, India is pushing for relief on Europe’s carbon tax, which could benefit Indian exporters facing stricter environmental regulations.
Impact on Indian Liquor Stocks
The possibility of a reduced import duty on alcohol and relaxed rules for Indian whisky exports has already had an impact on the stock market. Shares of leading liquor companies like United Spirits, United Beverages, Radico Khaitan, and Allied Blenders saw a positive surge today as investors responded to the news. This reflects the growing anticipation that the Indian alcohol market could see significant changes if the proposed reductions in duty are implemented.
As the negotiations continue over the next five days, both India and Europe are expected to work towards a mutually beneficial agreement that balances the interests of industries in both regions.
