India-UK FTA: Liquor to get cheaper, but how significant is the cut?
The India-UK Free Trade Agreement (FTA) significantly reduces import duties on UK spirits like whisky and gin. While this tariff reduction benefits companies, the price reduction for Indian consumers is limited, estimated at only Rs 100-300 per bottle.
New Delhi: The India-UK Free Trade Agreement is set to reduce the prices of imported alcohol brands, making them more accessible to the Indian consumers. However, the end benefit passed to the consumers will be limited, as the maximum price reduction could be only as high as Rs 300 per bottle.
The trade deal sees India slashing its customs duty on UK whisky and gin from the current rate of 150 percent to 75 percent and further taking it to 40 percent in the tenth year of the deal.
"Whisky producers will benefit from tariffs slashed in half, reduced immediately from 150 percent to 75 percent and then dropped even further to 40 percent over the next ten years—giving the UK an advantage over international competitors in reaching the Indian market," as per an official statement of the UK government.
The International Spirits and Wines Association of India (ISWAI) has praised the government on the trade deal and said that the latest development is a watershed moment in the alcobev (alcohol and beverage) sector. The deal will set a more balanced and equitable trade environment. ISWAI is the representative body of premium alcohol beverage companies that are mostly MNCs.
"The deal will significantly benefit Indian consumers, as premium international spirits will become more accessible, thereby accelerating the ongoing trend of premiumisation. It will also stimulate growth across ancillary sectors, such as hospitality, tourism, and retail, while potentially increasing the revenue for Indian states," ISWAI CEO Sanjit Padhi said.
Limited drop in prices of whisky: Industry Experts
Industry experts are of the opinion that the latest move is beneficial for the alcobev companies but not so beneficial for the end consumer, as there would be a slight price reduction in the consumer price ranging from Rs 100 to Rs 300 per bottle.
"Consumer prices for imported Scotch (whiskey) are not likely to change much. Most of the taxes on alcohol sit in states, and even if all customs duty reduction is passed on, the impact on consumer prices of imported Scotch whiskies will be in the range of Rs 100-300 per bottle," said liquor industry expert Vinod Giri.
Since the price range of whisky is wider, the final after-change consumer price is not going to be impactful for the existing consumers and is not going to get a new consumer. The deal will most likely benefit the companies, he further added.
The alcohol and beverages industry in India is currently valued at $52.4 billion. This industry is contributing to India's economy by contributing nearly 2% to the country’s GDP (in FY21), said the report titled Economic Value of the Indian Alcoholic Beverage Industry produced by the International Spirits and Wines Association of India (ISWAI).