India to meet liquor firms as domestic giants join foreign peers in Scotch dispute

By Aditya Kalra

NEW DELHI, Oct 31 (Reuters) - India's government will hold talks with liquor companies on Monday after domestic firms joined Diageo and Pernod in expressing alarm about a federal investigation into bulk Scotch imports, according to four sources and an industry letter.

In the first major dispute linked to a historic India-UK trade pact implemented in July, New Delhi has told major companies that bulk Scotch imports are not eligible for the tariff reduction to 75% from 150% agreed in the deal.

The International Spirits & Wines Association of India, a group representing Pernod and Diageo, has privately warned New Delhi that the move to exclude bulk Scotch ​imports could undermine the pact.

The Confederation of Indian Alcoholic Beverage Companies (CIABC) has now joined the protest by flagging a hit to domestic manufacturing, according to an October 27 confidential letter to the government that Reuters is reporting for the first time.

Around 80% of Scotch whisky imports from Britain by volume arrive in bulk to be used to make popular brands, and India's $65 billion alcohol industry had hoped the cut in tariffs would bolster business.

Top Indian commerce ministry officials will on Monday hold closed-door talks with several senior executives of foreign and domestic liquor companies to discuss the issue, said the four people who have direct knowledge of the meeting.

The ministry did not immediately respond to a request for comment outside regular business hours on Saturday.

Britain has said it is working with India on the issue, and Scottish government has raised the treatment ‌of bulk Scotch with New Delhi, Reuters has reported. India has not commented on the matter.

Whisky tariffs were a sticking point during years of protracted ​negotiations on a UK-India free trade deal, though India, a whisky-loving nation, ultimately agreed ⁠to halve taxes on certain Scotch imports.

INDIAN PEERS SEEK URGENT INTERVENTION

The CIABC's letter said that if bulk Scotch used in Indian manufacturing was not eligible for the lower tariff, "this could create an unintended incentive in favour of importing finished products."

"Such an outcome would run counter to the objective of strengthening domestic manufacturing under Make in India," it added, seeking urgent intervention to avoid disruptions.

The group’s members include listed Indian majors Radico Khaitan, maker of the 8PM brand, and Allied Blenders and Distillers, maker of Officer’s Choice. CIABC and the companies did not respond to queries. All firms have said they comply with the law.

Allied Blenders said in an investor presentation this week it is “one of the largest bulk Scotch importers” and the UK pact would improve its “luxury portfolio accessibility”.

Import tariff disputes have long been a sore point for foreign investors in ‌India who ⁠have faced demands for large amounts of back tax. Indian officials say they are only enforcing the law of the land.

(Reporting by Aditya Kalra; Editing by Edwina Gibbs)