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Tariffs on liquor imports: EC may take India to WTO

Bhupesh Bhandari

The European Commission may take India to the World Trade Organisation if its demands regarding tariffs on imported liquor are not met in the next Budget.

"If changes have not been implemented by next year's Budget, it will be up to the EC to decide what further action should be taken, including a possible reference to the WTO," Tim Jackson, director of international affairs, The Scotch Whiskey Association, which took up the matter with the European Commission said.

Jackson said that though the government had removed quantitative restrictions on liquor imports with effect from April 1, 2001, the high duties have seen a drop in liquor imports as well as a fall in government revenue since then.

"Industry estimates suggest that the import of liquor has gone down by 60-70 per cent since April 1 and customs revenue has fallen by almost 20 per cent.

The only gainer is the bootlegger who is laughing all the way to the bank," Jackson said.

He said the Scotch Whiskey Association now wants to see a 24 per cent cut in import duty in the coming Budget to account for this year as well as the next year.

"India is the most protected market in the world. China, which has just entered the WTO, has given a commitment to reduce the import duty on liquor to ten per cent in five years," he said.

In July 2001, the EC, supported by the US, had written to the Indian government alleging five breaches of its commitment to the WTO on the issue.

One, India had failed to reduce the import tariff on imported liquor from 210 per cent to 198 per cent in the 2001-02 Budget.

Two, the additional duty (75-150 per cent ad valorem) introduced was in excess of the excise duty imposed on liquor manufactured within the country.

Three, the government had retained the four per cent special additional duty.

Four, it had acquiesced to various state taxes and charges on imported liquor. And finally, it had restricted the storage of imported products in customs bonded warehouses through a reduction in the interest-free bonding period.

On the question of Indian whiskey being denied access to the European market, Jackson said that as many as 60 countries in Europe, the Americas and Africa have stipulated that whiskey should be made from grain and matured for at least three years.

Most Indian whiskeys are produced from molasses. "Consumers have a certain expectation from a whiskey. Indian companies are free to sell their rum, gin and grain-based whiskey in Europe at zero import duty," he said.

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