Govt Likely to Bring Reduction in Import Duties on High-end Alcohol at India-EU FTA.

NEW DELHI: Cheap European wines may not get any cheaper, but price of your favourite Scotch whiskey may drop once the proposed free trade agreement between India and the EU is in place. The government has decided to shield low-end wine and liquor producers against duty cuts in the proposed pact, but is likely to bring about 'considerable' reduction in import duties on high-end alcohol, a government official told ET.

Duty cuts for automobiles, too, will not be steep and not cause 'distress' to the local industry.

"We understand the sensitivities of our low-end wine and liquor producers and also recognise the backward linkages they establish with farmers. We do not want to expose them to competition," the official told ET. Automobile manufacturers, too, will not be stripped of all protection, the official added.

The India-EU FTA seeks to open up markets in goods as well as services and simplify investment rules to boost bilateral trade that crossed $90 billion in 2010-11. India exported goods worth $46.82 billion to the 27-member EU and its imports from the region were to the tune of $44.53 billion. Both commerce and industry minister Anand Sharma and EU trade commissioner Karel De Gucht have expressed hopes that the deal would be sealed before the India-EU summit in February 2012.

Wine and spirits and automobiles, which enjoy high tariff protection in India, are the two sectors where the EU has been promised increased market access by India in exchange for lower duties for a host of items including textiles, garments, leather and agriculture products. While import duty of 150% is levied on alcohol imports, automobile imports attract a 110% duty.

The commerce department's plans of reducing import duties on both products has met with resistance from the industry which has so far been protected against duty cuts in the free trade agreements India has signed with countries such as Japan, South Korea and the Asean.

"The segment that the Europeans, including the Brits, are interested in does not clash with what our industry produces. They will be happy with duty cuts in the high end segment, so the lower end segment will not be affected," the official said.

Duty cuts on expensive liquor would result in revenue loss for the government, but it is something that a country like India should not worry about when it is entering into a FTA. "We are not giving the Europeans anything for free. We will also get market access for products such as garments, leather and farm goods when the agreement is implemented," the official said.

Despite protests from automobile associations like SIAM against duty cuts on fully built automobiles and auto parts, the government is likely to bring about some reduction.

EU, too, is expected to bring down its duties on automobiles for India which will be beneficial when India's preferential access to the EU market under the GSP scheme for developing countries expires in 2013.

Source : economictimes.indiatimes.com