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Posted: Saturday, 02 July 2022 18:30

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Indo-UK FTA: Lower expected Duties on Cars and Scotch may be a Hurdle

July 02: This seems to be a season of FTA’s India with the other sides aiming for the moon; the latest being the ongoing talks for an India-UK Free Trade Agreement (FTA) the fourth round of which concluded last week on June 24 with UK targeting lowering of duties to unrealistic levels, which could become a hurdle for the Agreement to be signed, despite India relenting to reduce the duties they had not agreed to in the fizzled Indo-EU talks before Brexit, writes Subhash Arora

File Pic - British Foreign Secretary Liz Truss and External Affairs Minister 
Subrahmanyam Jaishankar. (Pic Courtesy : Moneycontrol)A recent Article in Moneycontrol one of the main sticking points in the pact continues to be India's hesitation in opening up its market to foreign products and the equally aggressive push by foreign sellers in entering large segments of India's growing market that remain underexplored.

British demands for lower tariffs on automobiles and Scotch whisky in the proposed free trade agreement (FTA) with India have again emerged as a bone of contention. This issue had been considered to be almost closed after the previous ministerial-level meetings.

In the case of this Agreement as in most other cases, the UK has been insisting on India importing high-value British products such as scotch whiskey and automobiles at zero duty or low tariffs. In all fairness, India had earlier offered the UK lower duties on alcohol after a suggestion from Piyush Goyal, Commerce and Industry Minister, perhaps keeping in view the changed stance of the government which agreed to gradual reduction over 10 years of customs duty as seen on the recently inked Indo-Australian FTA.

Even in that case, before the ink dried, wine professionals in Australia had displayed dissatisfaction on the reduction not being enough and a desired push to allow the import of bulk wine which could likely kill the domestic wine market.  

The latest issue refers to the British demands for an immediate reduction in customs duty on imported spirits, namely Scotch whiskey from the present 150 %. India has naturally asked for more time to adjust its trade and revenue flows.

International liquor trade bodies have pitched for tariff cuts to as low as 30 percent over 3 years. The fifth round of negotiations, due to take place in July 2022 in New Delhi, is expected to focus on this issue but delWine opines that the government is not going to relent to their demand.

Indian made spirits, especially Single Malt Whisky and Gin with Indian herbs like juniper are much in demand even overseas. Keeping in mind the Made in India concept promoted by the Modi government, the industry has been on the upward move. Single Malt Whiskies have been winning unprecedented international medals and have already earned respect from even the UK and the government is aware of the latest trend and will not allow the industry to collapse and hence the dichotomy.    

The recent free trade agreement India signed with Australia reduced the tariff on imported wine with a minimum import price of $5 per 750 ml bottle from 150% to 100 % and gradually to 50 % over 10 years. For the super-premium wine category priced above $15 for the standard 750 ml bottle have been reduced from 150% to 75%, with the target of lowering it to 25% over the next 10 years.

However, even as Australians have complained, the volume for both these categories is rather negligible currently (though a discerning change has been observed pan India during Covid). Unlike wine, the level of consumption of Scotch whisky and other spirits is much higher in India. As a result, the government is against drawing a direct parallel with the Australia deal, though it might be inclined to replicate it for the ongoing Indo-US FTA.

In any case, the government has indicated both these agreements to be signed before 2023 and the window of speculation is much shorter than the previous occasion when the talks between 2007-2013 came to a big naught and even the Modi government did not pay much attention from 2014 till last year.

In the latest round of negotiations, officials joined technical talks in both online and offline mode. While the majority of officials attended them virtually, a team of Indian officials was in London. A detailed draft treaty text was advanced with technical experts from both sides discussing it in 71 sessions covering 20 policy areas.

Going Chapter by chapter, discussions have reportedly concluded 4 of the 26 chapters of trade rules covering areas such as tariffs, investments, intellectual property rights, customs, rules of origin, standards and technical barriers to trade, according to the news Report.

On the tariff front, India has suggested that both sides should soon exchange a list of over 40 items on which they are willing to remove duties.

India’s bilateral goods trade with the UK was worth $17.4 billion in 2021-22, higher than the previous record of $16.8 billion in 2018-19. Indian exports were $ 10.4 billion, up from the previous highest of $9.6 billion in 2017-18. Imports jumped to $7 billion, but remain lower than the $7.5 billion hit in 2018-19.

Subhash Arora

 

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