India-UK FTA: Scotch whisky, gin tariff cuts unlikely to impact retail prices
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Mumbai: Tariff cuts on Scotch whisky and gin will not lead to major price revisions, at least in the short term, as import duties currently make up only 10-15% of the total shelf price, say industry executives.As per the India-UK free trade agreement (FTA), tariffs on UK-made whisky and gin will be halved to 75% initially, eventually dropping to 40% over a ten-year period.The executives emphasised that most global companies were already invoicing at lower-than-ideal prices to compensate for the high duties in India.With state taxes, production, distribution and marketing costs remaining unchanged, tariff reduction will translate into less than 10% of their cost savings, which may not be passed entirely, they said."India is the world's biggest whisky market by volume and greater access will be an eventual game changer for the export of our Scotch whisky brands," said Jean-Etienne Gourgues, Chairman and CEO at Chivas Brothers . "The deal will support long term investment and jobs in our distilleries in Speyside and our bottling plant at Kilmalid and help deliver growth in both Scotland and India over the next decade," Gourgues said, adding that he hopes both governments will move quickly to ratify and implement the deal.Scotch whisky, the biggest global spirits segment by volume, has a 4% share of India's total whiskey market as high taxes make them pricier. While FTA will translate into lower cost, it will depend on categories within scotch in terms of bottled in origin (BIO) versus bottled in India (BII).Scotch imported in bulk for bottling in India or BII accounts for over three-fourths of scotch imports. Savings can therefore be made only on the liquid element with production and packing costs remaining unchanged, bringing prices at par with fully imported bottles.
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