| Double blow
London, March 1: The Scotch Whisky Association (SWA) threatened today to push the European Union into launching its disputes procedure against the Indian government for failing to bring down the tax on imported whisky.
The association wants the tax, which it says is between 225 per cent and 550 per cent, brought down to a “more reasonable level”.
Gavin Hewitt, its chief executive, said: “Regrettably, India has failed its WTO challenge and continues to deny fair market access for Scotch whisky and other imported spirits.”
He added: “The budget was a last opportunity for India to reform the system. That opportunity has been missed and we are now urging the EU to take the matter to a WTO panel at the earliest opportunity. India’s discriminatory tariff and tax regime for imported spirits must be reformed in line with international rules.”
One of the problems from the Indian point of view is that “Indian whisky”, such as that made by Vijay Mallya’s United Breweries, is denied access to the EU labelled as “Indian whisky” because it is made from molasses. It has to be labelled something like “spirit drink” or “Indian spirit drink” because, according to the association, whisky has to be made from cereals.
The association is adamant that what constitutes “whisky” has been accepted for “hundreds of years” and will resist any move towards liberalising the definition.
It said Indian whisky made from cereals would be allowed into the EU and could be sold as such. But Mallya has told The Telegraph: “I am quite willing to label my whisky as ‘Indian whisky’ — let the customer decide.”
The association, which wants access to India’s affluent middle classes, pointed out that out of the 110m cases of spirits sold in India — each case is 9 litres in volume – whisky from Scotland accounted for no more than 750,000 cases or “less than 1 per cent of the market”.
If the import tariffs were reduced to a “more reasonable level”, it predicted its sales would rise to about 3 million cases.
The dispute between India and the Scotch association has been going on for a long time.
The association said: “An exhaustive EU investigation in 2006 found that the Indian fiscal regime for imported spirits and wines is in ‘blatant violation’ of WTO rules and urged early reform of the system.”
According to an association spokesman, the panel members to resolve the dispute would consist of “industry experts”. The hearing would last six months, with another three for an appeal. Assuming India lost, it would be given 15 months to implement the ruling. The panel’s ruling would be “binding on the parties to the case”.
The association said: “The EU spirits industry has been successful on each of the three occasions on which discriminatory spirits taxation has been considered by a WTO panel — in relation to Japan, Chile and South Korea.”
Meanwhile, a spokesman for EU Trade Commissioner Peter Mandelson told Reuters that Brussels was still studying the Indian budget.
“If it does nothing to resolve the dispute over India’s additional duties on wines and spirits this would clearly be a significant disappointment,” spokesman Peter Power said.