by Subhash Arora
In a surprising move, the European Union has suspended its complaint against India to WTO for its unjustifiable import tariffs on wine and liquor and has agreed to the suspension of the 3-member panel of WTO investigating its case against
India for up to a year.
It will, however, continue to monitor the situation on the ground to make sure that no new discriminations appear at state level
The change of heart follows India’s recent decision to remove the ACD on imported wine, beer, and liquor. The increase in basic duty announced by the government on wines from 100% to the outside limit of 150% as per the agreement WTO would have to be acceptable to EU. Brussels did, however, play the usual rhetoric, saying it regretted that India was raising its basic duty on wines to 150 percent from 100 percent.
EU appears to be happy because there is a lot more scope for export of beer and whisky from Europe than wine. While last year 132 million cases of beer were consumed in India, the comparable figure for liquor was 120 million cases. With a total consumption of less than a million cases of wine, the EU does not seem to be much perturbed that the premium quality wines would become more expensive than before by 7-10% even if the states did not start charging the extra excise duty.
Under Section 47 of the Indian Constitution, State governments have the power to set duty levels and may adjust them following the central government’s move. The central government could pass legislation through an Act of Parliament by which the states can be limited to charging the maximum duties on imported alcoholic products the same as for the Indian made equivalents. However, no such bill was presented in the parliament, despite the earlier assurance by the governmental.
Maharashtra has now utilised the powers given to it under this Section and has already announced a special fee of 150% on the assessable value of imported wines and 200% on foreign liquor, thus wiping out most of the benefits allowed by the scrapping of ACD.
While the Indian wine producers are grumbling that they will be swamped by cheap imported wines, the importers are equally upset because their sales may not increase much.
The hotels which were buying duty free are the worst sufferers in Mumbai and other parts of Maharashtra because they will end up shelling out the 150% duty now whereas they were getting away with as low as 5% on expensive, premium wines. The Latours, Rothschilds, Gajas, Antinories, Moet Chandons, Joesph Drouhins and their likes will all become prohibitively expensive.
The United States, anticipating this move by the states has been cautious. It has said it would continue with its separate WTO probe. India's scrapping of the additional duties was a "positive step," said Stephen Norton, a spokesman for the Office of the U.S.T.R. But he said US would continue its case "until the concerns raised in the dispute are resolved."
