India, EU whine over wine duty

DUTY ON WINE: The EU's grouse is with additional customs duty that it says, inflates the price of wine by 280 per cent.

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New Delhi: The European Union's Agriculture Commissioner and India's Commerce Secretary see eye to eye not only on the agricultural talks at the WTO but also, it seems, on the Budget as well.

Both had hoped that the Budget would remove high discriminatory taxes on imported liquor.

Says EU Agriculture Commissioner, Mariann Fischer Boel, "I am disappointed because we had hoped that India would send a signal through its Budget that it would be ready to cut extraordinary high tariffs."

Adds Indian Commerce Secretary, G K Pillai, "We are equally disappointed and we shall persuade the Finance Ministry to reduce the tariff."

The EU's business delegation has representatives from the liquor industry who want to prise open India's large wines and spirits market.

India imposes the bound or maximum permissible customs duty on spirits and a third less than that permitted on wine.

The EU's grouse is with additional customs duty that it says, inflates the price of wine by 280 per cent and that of spirits by 550 per cent. These violate the WTO principle of national treatment.

Says Pillai, "The Finance Ministry had at least at the official level agreed to keep duties at the bound level. We will resolve the matter in the next couple of weeks."

Last November, the EU had given notice for consultations. If the issue is not resolved within the next few weeks, the EU can invoke the WTO's dispute settlement mechanism.

Additional customs duty clearly violates WTO principles. On wine at least, these can be replaced by higher customs duty.

This can be done outside the Budget because Parliament's approval is not needed.

But India domestic liquor industry, cosseted by high duties, wants to portray less restrictive imports as promoting the drinking habit, which is not the case. If one has to sin at all, it is better to do it with some refinement.