| ‘In a make-or-break scenario for signing of the free trade agreement with the EU, India has offered to drastically cut the customs duties on wines and spirits to 40 per cent from the current 150 per cent’. This offer was reportedly made by Commerce and Industry Minister Anand Sharma to EU trade commissioner Karel de Gucht on the sidelines of the Organization for Economic Co-operation and Development summit in Paris recently. This is a huge compromise, and rightly so for the hapless wine consumer in India. Since the negotiations have been ongoing since 2007 with both sides trying to squeeze the maximum benefits, various figures have been thrown around by The media as final but this one beats them all.
According to Business Standard, India also proposed to cut the threshold price per bottle of wine to $3.7 and whisky to $5.5 for the reduced duties to be effected. This implies that for all the low-ended wines costing less than $3.7, there still would be the same duty of 150% -anything over $3.7 would be liable for 40% duty only. Of course, if that happens, one would see a massive over-invoicing along with illegal outflow of foreign exchange, instead of being the other way around. However, according to senior officials involved in the talks, the Europeans still want a reduction to 30 per cent and the threshold price of both wine and whisky to $3.5, says the report.
India's wine segment is rightly up in arms against the government's offer. As Subhash Arora of delWine told the journalist who had called and had detailed discussions with her and as she rightly quoted, "A reduction of duties to 40 per cent across the board means opening the gate for cheap imports. This way, the Indian wine industry will perish and this will also impact the farming community," said Subhash Arora, President, Indian Wine Academy.
No self respecting country in the world, least of all India, which is perceived with more fear and respect than we see ourselves as we watch television and read the front page media reports, can make progress in the sunrise industry like wine - a low-alcohol, healthy option for millions of alcohol drinkers. It has far reaching consequences for farming and agriculture which has been a pillar of the Indian economy. Most producers in the world agree that the domestic wine industry of a nation has to progress if the imports have to increase and the overall consumption increases. California is the most classic example where the industry has become world class only by its determination to beat the best in the world, namely Bordeaux and Burgundy etc.
The reduction in duties at this stage when the farmers and wine producers are facing genuine problems (despite plenty of froth in their whines) and the government needs to address them-unless the government wants the Indian producers to shift base and buy vineyards in France like China has been doing vigorously during the last couple of years, it owes it to the country and the wine drinkers like us to have the policy of ‘Live and Let Live.’
Consumers must have access to quality wines and the reduced duties of 40% (in fact 30% for wines beyond say $15-20) will not only not affect the domestic industry negatively, it will have a positive impact because the more passionate producers with deeper pockets will invest, innovate and invigorate themselves to increase the quality. I cite the California example once again where cheap ‘Burgundy’, ‘Chianti’ in 5 liter-bottles was the rule of the day 50 years ago; today they have a Screaming Eagle and Harlan Estate who sell for over $1000 and compete with the best of Bordeaux. They did it because of their pride and getting the technology and investments from there.
As the reporter quotes Arora further and says, "He said the government cannot afford to take such a decision at election time. If this happens, prices will come down so much that nobody will then opt for Indian wines anymore. And even if they are able to sign the treaty on this, Parliament will not let it pass." With due respect to the Hon’ble Commerce Minister Anand Sharma, let us not forget that he has to run for elections next year. How would he be able to justify to the people, the shutdown of the industry which is still in doldrums but has been trying to grow during the last 20 years?
Unfortunately, Rajeev Samant of Sula and Abhay Kewadkar could not be contacted for their opinions as they are perhaps in Bordeaux attending Vinexpo. Even Jagdish Holkar, the Chairman of the IGPB had his phone switched off. Kapil Sekhri, one of the partners of Fratelli Wines had just returned from his export promotion trip to UK and the US. He was not aware of the goings on but he did say that in general they had no problems with duty reduction on higher-ended wines but reduction on cheaper wines would hurt their market and the heavy investmetns they have made.The Ambassador of EU delegation in India Mr. Joao Cravinho is away on a mission. But delWine did manage to talk to Mr. Peter Young, the EU rep in India directly responsible for facilitating the talks. He was not keen on giving any information, saying, ‘I can only tell you that the talks have been going on rather frantically and we are trying to find an acceptable solution. However, until the deal is sealed, how can anyone say what has been proposed or accepted. Both the parties are trying to extract the maximum from the other but we are also very keen to sign the treaty. But till that happens it is not fair on any side leaking the information because things are changing all the time.’
True. And in any case, signing of the FTA is not the proclamation of law applicable to both sides instantly. Both sides have to ratify from their respective constituents. Knowing the somersaults made by the Hon’ble Minister in case of the FDI in Retail, it was finally signed only to be kept in cold storage for a year before being notified. As of today no concrete investment has taken place so far and both sides have been playing their respective ‘Bluff’ moves.
We will have to follow a Wait and Watch policy in India and EU. Surprisingly, the Times of India which generally jumps the gun, has kept quiet this time and let Business Standard do the walking and talking. Perhaps the editorial staff has not returned from Vancouver where the TOIFA function was held recently. However, we hope one day, BS can take credit for being the first one to have truly broken the story. As a consumer, we totally support them - as Indians we would still have some reservations.
Subhash Arora
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Tags: Indian wine industry
, Anand Sharma , Karel de Gucht
, India
, IGPB
, FTA |