The next round of free trade agreement (FTA) talks with the UK will be held next month amidst the shadows of the income tax surveys against the BBC and opposition to the surge in Scotch imports.
The fourth round of negotiations is scheduled from March 13-17.
Both India and the UK have agreed to discuss and finalise the modalities for the exchange of offers in goods and services next month, commerce ministry officials said.
While New Delhi is seeking a reduction or the elimination of duties for the benefit of its labour-intensive sectors such as textiles, leather and gems and jewellery, the UK wants duty concessions in areas such as Scotch whisky and automobiles.
Officials said the search operations by the tax department at the BBC’s offices are unlikely to have any impact on trade and economic relations between India and the UK as the broadcaster is operationally independent of the UK government.
“We do not think the tax searches in the BBC office in India will be regarded as action against the UK government. Trade and other relations with the UK are unlikely to get affected.”
The officials said it would undoubtedly weigh on the minds of negotiators when they meet next month. But, it is unlikely to impact the negotiations.
Indian industry, however, is rattled by the spurt in the import of Scotch whisky and is lobbying hard to ensure minimal concessions are given only in phases and over the long term to the British.
Vinod Giri, director-general, of the liquor industry organisation CIABC, said: “According to the Scotch Whisky Association, India has become the largest export market globally. This is also supported by the Government of India data which shows imports growing 148 per cent from April to September 2022 over the same period the previous year.”
“During this period, the domestic industry grew just a little over 20 per cent. These facts simply disprove the claim made by some SWA members that Scotch whisky is being denied fair opportunity in India.”
The Confederation of Indian Alcoholic Beverage Companies (CIABC) is the apex body of liquor makers, whose members include major Indian companies such as Allied Blenders & Distillers, Radico Khaitan, Inbrew, Mohan Meakin, Jagatjit, Tilaknagar, Alcobrew and Amrut.
The trade body in its memorandum to the commerce ministry has sought a minimum procurement price of $5 per bottle, inclusive of cost, insurance and freight, for the Indian subsidiary.
“The fact that Scotch whisky is growing many times faster than the domestic whisky industry even in the absence of an FTA, puts in question the very need for an FTA. Customs duty concessions, coupled with a misplaced approach of supporting imported products would be catastrophic for domestic industry. We appeal to the government to tread carefully on the UK FTA and ensure minimal concessions are given and that too in a long-phased manner.”
The CIABC said Scotch sells in India at prices even lower than in the UK: a bottle of the largest-selling brand retails in Delhi for Rs 1,700 per 750ml bottle against the pound equivalent of Rs 1,900 in Tesco stores in the UK.
The liquor industry body charged the Scotch makers with following an opaque ‘‘transfer pricing’’ methodology when selling to their Indian subsidiaries.
It said the price at which the Indian arm gets the drink from the UK is just Rs 174 per bottle compared with Rs 214 in tourism destinations such as Dubai — the “under-pricing” depriving the government of customs duties.
The CIABC suggested the minimum entry price be based on international benchmarks that follow the pricing on arm’s length principal among parties.
