Indian trade pacts must lower tariff on alcoholic drinks: Think tank

Such beverages will be 'key issue' in discussions as country seeks access to large markets, says ICRIER report.

India cannot sign trade agreements with large export markets without reducing tariffs on alcoholic beverages, according to a report by think tank Indian Council for Research on International Economic Relations (ICRIER).

India, to gain market access for, must offer phased tariff liberalisation in high-growth areas such as wine, said the report titled 'Liberalisation of Wine Trade under the India-Australia CECA' by Arpita Mukherjee and Drishti Vishwanath.

“Alcoholic beverages will be a key sector in the discussions although products may vary–for example, whiskey for the UK and wines for EU and Australia. Given that imports are only one per cent of domestic consumption and are not a major source of customs revenue, and India has strong domestic producers who now export, India can offer phased tariff liberalisation in this sector to gain market access in sectors of its export interest,” the report said.

India is negotiating trade agreements with the European Union, United Kingdom, Canada. India signed a trade pact with Australia in April, liberalising tariff on wines for the first time.

India levies a tariff and cess of 150 per cent on alcoholic beverages, making it one of the highest such tax in the world.

Under the India-Australia economic cooperation and trade agreement (ECTA), tariffs on wine with a minimum import price of $5 per bottle will be reduced from 150 per cent to 100 per cent on the trade deal's implementation and subsequently to 50 per cent over 10 years. The duty on bottles with a minimum import price of $15 will be reduced from 150 per cent to 75 per cent, and subsequently to 25 per cent over 10 years.

The report pointed out that even though India has agreed to reduce duty on Australian wines, the duty reduction will benefit only the upper end of wine imports and high-income consumers. This means that the threshold as agreed in the agreement only covers 2 per cent of all wine imports from Australia into India.

The rest of wine imported from Australia–about 98 per cent, which is consumed by middle income consumers - continues to attract a duty of 150 per cent, the report said.

Among alcoholic beverages, tariffs are the highest on wine, resulting in the price of imports ranging at between 200 and 400 per cent of the global average price. For more than two decades, Australia and the US have expressed concerns about India’s high import duties, it said.