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Delhi Wine Club
Duty Reduction on EU Wines Distant Dream

Posted: Thursday, 19 January 2012 17:50

Duty Reduction on EU Wines Distant Dream

Jan 19 : Despite a flurry of recent reports in the Indian media pronouncing the imminent signing of Foreign Trade Agreement between India and the EU, signing of the treaty and indeed the reduction of customs duties may still be months away at best, writes Subhash Arora who has always been skeptical of its becoming a reality at the next India-EU Summit on February 10.

Confirming the doubts often expressed by delWine, is the indication given by Baroness Catherine Ashton, the High Representative for Foreign Affairs and Security Policy for the European Union (the EU equivalent of our Foreign Minister, Mr SM Krishna), who visited India on Monday and Tuesday.  Addressing the media after the preparatory meeting in Bangalore before the Indo-EU summit scheduled to be held on February 10, the Baroness conceded that although significant progress had been made, the finer details of the agreement would take some more time.

In bureaucratic parlance, some more time translates to some months and not some days- the much awaited Indo-EU Summit by the European wine producers and Indian importers is merely 3 weeks away.

She refused to elaborate on a timeframe in which the agreement would be ready. “It is important that the agreement be a sustainable one,” is all she was willing to concede at this point. During her visit she also met Commerce and Industry Minister, Anand Sharma and both were believed to have discussed an early conclusion of the deal. This implies that no deadlines were set for either side.

This is in sharp contrast to the reported news only  a couple of weeks ago with a national daily declaring that the taxes would come down soon  with one report going to the extent of claiming that the  Indian Prime Minister had also announced that the government had accepted to reduce duties on wines from EU!

Beyond doubt the negotiations on India-EU free trade agreement (FTA) which entered round 14 of the negotiations that started in June 2007, has made steady progress with the Indian side conceding that they are willing to consider wines and spirits imports  at lower duties.

A reliable source of delWine has indicated that the negotiations on the taxation rates were still underway and nothing concrete had been decided or could be disclosed. It is however likely that the rates of duties will be lowered on medium and high quality wines.

The FTA also focuses only on the issue of cross-border taxation matters- this could also mean good news for Indian producers since lowering of duties on exported wines and spirits will make them more  competitive in the EU markets and perhaps will open doors of hitherto unapproachable markets due to higher landed costs.

No Lowering of Duties in February

Explaining to delWine, our source at the office of the EU Delegation in India, explained that whenever the FTA is signed, the result will not be applicable from the next day-like in the annual union budget. EU will have to ratify in its member nations and the Indian government would have to convince the Indian public about the advantages of signing the final draft of the FTA- including the wine and spirit sector and that it will not harm the domestic industry.

Several groups of anti-alcohol ‘crusaders’ who don’t raise an eye-brow when hundreds die because of hooch tragedies which are more common than the frequent eruptions in Etna's mountainous volcano in Sicily, or shed a few crocodile tears on such occasions, would also have to be convinced that not only will the domestic industry not be wiped out, but also the whole country will not turn alcoholic by executing the FTA.

The benefits of the FTA which are supposedly marginally more for India than the EU, would need to be explained. Though no one is willing to risk estimating this time frame, it will certainly not be in the current Fiscal year 2011-12 and may even be effective from 2013-14 even if it is signed on 10 February, 2012.

The issue of Excise duties will still remain contentious. If the state governments including the Delhi government which thrives in increasing excise duties on wine etc rather than controlling its costs and govern better, decide to increase the excise duties like they did when the ACD (Additional Customs Duty) were abolished in July 2007, the efforts of the overseas wine producers to sell more wine will be again neutralized. As the source explained, this is an internal matter and they cannot interfere nor influence in the internal policies of States. However, they would certainly take up such aberrations if a discrimination is proven against the imported wines.

In the meanwhile, one sincerely hopes that the importers are not postponing  their immediate imports and thus face shortages and lost business despite the recent boom and increase in the off-take of the stocks which are generally running low for many labels in their portfolios.

And let EU and the Indian government worry about the reduced chances of the signing of FTA with every progressive round since the Assembly elections in several states are around the corner and soon the general elections ‘14 will be around, making the FTA a reality even more remote.

Subhash Arora

For one of the recent articles, please clicks

Blog: European Union Bewarer,
Fine Wines from EU may get Cheaper Next Year



Siyamalan Says:

Is it the state government, who ultimately decides on when to change/reduce excise duty on imported wines, once the agreement is sealed by central gov?. I believe, FTA will do real good for Indian agricultural produce and the Imported spirits & wines will still remain beyond the purchasing power of people who merely consume alcohol for booze. Cheaper imported wines will set a high standard and domestic producers have to improve their quality. Eagerly waiting to find those "anti-alcohol ‘crusaders" who stand against our country's development.. Thank you Regards Siyamalan

Posted @ January 20, 2012 11:10


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