The case for Scotch

Scotland's Scotch Whisky Association asks for duty barriers to be lowered for India's own sake.

Pete Wilkinson, director of international affairs, Scotch Whisky Association (SWA), is in India and he's on a mission. The Edinburgh-based SWA wants a drop in India's duties on Scotch. True to the brands that sell globally under this label, the case it is making is one of enlightened self-interest.

Although duties have been falling (from an all-time peak of 700 per cent in April 2001, they are now in a range of 212-525 per cent all added up), the duties, says Wilkinson, are prohibitive, and are not only decreasing demand for Scotch whisky but ruining any potential money the government could make from it, by creating a grey market.

"A bottle of premium Scotch whisky in Delhi," says Wilkinson, "can cost up to Rs 2,500. Ideally, we'd like to get this down to at least Rs 2,000. For a lower segment whisky, we'd like to go from the current Rs 1,300-1,400 to Rs 1,000-1,100. The basic customs duty now is 150 per cent; we'd like to see this reduced to 75 per cent."

Wilkinson argues that such a reduction would not only help marketers of Scotch, but also the government, which is currently not raking in as much on excise duty as it could, and the liquor consumer, who is risking fakes by going to the grey market. "Now, the government only collects duty on 6,000 cases out of 250,000."

Would the government care to listen? Well, it cannot ignore the domestic liquor lobby that insists on protective barriers. Some argue that a drop in excise will harm demand for domestic whisky, but Wilkinson waves this away.

And he has a point: domestic whisky sells for anything between Rs 350- 500 a bottle, much below the targeted price of imported whisky, and Wilkinson believes that these two segments are directed at such different consumers that there will be no overlap.

Indian whisky and Scotch are not mutual substitutes, so there should be no worry. "All that this drop in duty will accomplish," insists Wilkinson, "is to get rid of the grey market."

But then, protectionists are not about to give in so easily. Some Indian legislators have accused the SWA of being hostile to Indian whiskies, which are not allowed into Europe.

The reason, according to Wilkinson, is that the EU has strict regulations on what constitutes "whisky" (any spirit made from cereal and then matured, while Indian whisky is made from molasses).

"We've already got an Indian malt whisky, Amrut, on sale in the UK. It's not that we're against importing whiskies, but we feel that to import whisky made from molasses would mislead and confuse the European consumer. India is free to import its whisky under any other name, but we feel that this argument is a bit of a red herring, used to divert attention."

So, is Wilkinson optimistic? "We're fairly sure that we've got our point across, that someone's listening, but we recognise that it may be difficult. Politically, I'm sure the Indian government doesn't want to compromise any kind of bargaining power it has at the Doha Round of the WTO talks, by reducing customs duties now. On the other hand, I am optimistic that there is a reasonable chance that we can succeed."

If the SWA does succeed, though, it would perhaps be because of surging consumer sentiment within India.

It's only a handful of people who know the value of Scotch. But they do know.