Indian trade pacts must lower tariffs on alcoholic beverages: think tank

India cannot sign trade deals with major export markets without reducing tariffs on alcoholic beverages, according to a report by the Indian Council for Research on International Economic Relations (ICRIER) think tank.

India, to access the market, must offer progressive tariff liberalization in high growth areas such as wine, says the report titled “Liberalization of Wine Trade under the India-Australia CECA” by Arpita Mukherjee and Drishti Vishwanath.

“Alcoholic beverages will be a key sector in the discussions, although the products may vary – for example, whiskey for the UK and wines for the EU and Australia. As imports only represent one percent of domestic consumption and are not a major source of customs revenue, and India has strong domestic producers who are now exporting, India can offer progressive tariff liberalization in this sector to access the market in the sectors that it is interested in exporting,” the report states.

India is negotiating trade agreements with the European Union, the United Kingdom, Canada. India signed a trade pact with Australia in April, liberalizing wine tariffs for the first time.

India levies a 150% customs duty and tax on alcoholic beverages, making it one of the highest taxes in the world.

Under the India-Australia Trade and Economic Cooperation Agreement (ECTA), tariffs on wine with a minimum import price of $5 per bottle will be reduced from 150% to 100 % upon implementation of the trade agreement, then 50% over 10 years. The duty on bottles with a minimum import price of $15 will be reduced from 150% to 75% and then to 25% over 10 years.

The report pointed out that even if India agreed to reduce duties on Australian wines, the reduction in duties will only benefit the high end of wine imports and high-income consumers. This means that the threshold agreed in the agreement only covers 2% of all wine imports from Australia to India.

The rest of the wine imported from Australia – around 98%, which is consumed by middle-income consumers – continues to face a 150% duty, according to the report.

Among alcoholic beverages, tariffs are highest on wine, causing the price of imports to be between 200 and 400% of the world average price. For more than two decades, Australia and the United States have expressed concerns about India’s high import duties, he said.

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