April 02: India has agreed to reduce duties on Premium and Super premium Australian wines from 150% to 100% and 75% with a provision to reduce further to 50% and 25% resp. over 10 years as part of the Economic Cooperation and Trade Agreement (ECTA) signed with Australia today, writes Subhash Arora who says the reduction might be more than expected but slightly disappointing to Australians but the Indian industry may not feel secure with the duties reduced to 50% over 10 years on the $5-14.99 category, but this will also pave the way for duty reduction on wines from EU when the Agreement is signed, sooner than the 14 years it has taken so far since 2007
Perhaps for the first time since India signed a Foreign Trade Agreement, the country has agreed to reduce import duty on wines- the last time was in 2008 only when forced by the WTO. For the purpose, the price band has been defined- ‘premium’ wines with landed cost at an Indian Port of US $5-14.99 per bottle and the ‘super-premium’ wines costing above $15. Wines costing under $5 have been left out in order to protect the fledgling Indian wine industry producing quaffable wines.
The import duties will be reduced to 100% for the former category and 75% in the latter category when the policy is implemented in about 4 months. Similarly, the duties will be reduced subsequently to 50% over 10 years for the premium wines and to 25% for the super-premium categories- defined as the wines costing over $15. This means that the collectible wine costing upwards of say $50 will continue to attract the duty of 75% for now and 25% over 10 years.
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The ECTA which was signed today, 12 days after PM Modi has had a Virtual Summit Meeting with the Oz Prime Minister Morrison on 21 March.
This is the first trade agreement inked by India has signed with a developed economy in more than a decade. FTA Negotiations with UK, Canada and the European are already progressing where duty reduction is on the cards.
This is obviously a market shift in India’s strategy. No Protests have been announced so far-including the Fast threatened by the Indian Activist Anna Hazare who claimed that India was on a path of becoming an alcoholic country simply because Indian made wines would be available in Maharashtra in the local super-markets which met the predetermined requisites, in order to help the small wine producers and the Maharashtra farmer increase his income from grape growing. It would be interesting to see if the Protests take the shape that they did last month when the government had to bow down to the pressure and give a 45-day window to the public for their opinion before implementation of the policy decision taken by the Stage government.
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The India-Australia FTA was expected to be signed on March 21, according to the Mint. DelWine had opined that Australians were over -optimistic even though there seemed to be some urgency on both sides in today’s changed circumstances due to the Chinese aggressive stance and Russian-Ukraine conflict. Trade negotiations with Australia that started in 2011 have already taken 11 years, according to a Al Jazeera. But the Statements by various leaders including Piyush Goyal, the Commerce Minister and PM Narendra Modi indicated that they were in favour of a quick Agreement.
What helped speed up the process was perhaps the fact that Australia, India, Japan, and the United States are constituents of the Quad Military Alliance that was started in 2007 and lasted till 2008 but re-established in 2017 to establish an Asian Arc of Democracy and envied by China which claims it as ‘Asian NATO’ in the Indo- Pacific. The current cold war between China and Australia, signalling a perfect collapse of wine exports to China was another important factor.
India has kept many sensitive products in the exclusion category (about 30% of current tariff lines) without any concession. This is perceived to be a major gain for India in this ‘early harvest’ which is the first part of the Treaty divided in 2 parts, according to Business Standard.
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Now, one has to wait and see how the States will react to increasing the excise duties with the customs duty prices diving from 150% to 25% over the next 10 years.But Australian producers are very excited about the deal. According to the Advertiser, 'South Australian businesses are set to rake in millions after the federal government struck a historic trade deal with India set to have wide reaching effects.'
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