India's duty-free shops face the heat

Airports in the United States, the UK and other countries of Europe have decided to confiscate goods bought by passengers from duty-free shops in India, ostensibly as a security measure.

This threatens to put out of business the duty-free shops operating in over 15 airports in the country.

With duty-free sales falling by over 40 per cent, the Indian Duty Free Association - which represents companies running shops in duty-free areas - has approached the ministry of civil aviation demanding that India take a "quid pro quo" action to protect them against such discrimination.

Top sources said the civil aviation ministry is planning to approach the external affairs ministry to take up the matter through diplomatic channels.

The association has pointed out that the foreign countries' move was mainly intended to protect the interest of their own duty-free shops, which are facing declining sales partly because of security threats at airports and also owing to cheaper prices offered at airports of developing countries such as India.

Duty-free shops clock an annual business of over Rs 500 crore (Rs 5 billion) and 70 per cent of their turnover comes from passengers departing from India, who find prices here much cheaper than those abroad.

Industry experts point out that the duty-free prices of liquor, perfumes and tobacco are at least 15 per cent cheaper than the prices in European or the US airports.

Apart from the state-owned India Tourism Development Corporation, Dubai-based Flamingo and the UK-based Alpha currently operate duty-free shops in India.

In the European Union countries, in the UK and Switzerland, a passenger on the Delhi-London-Birmingham sector will have his duty-free purchases from India confiscated. In the US, a transit passenger travelling Mumbai-New York-Chicago will also not be allowed to carry goods bought from Indian duty-free shops. These rules are being applied primarily on developing countries such as India.

According to industry sources, the UK airports have confiscated over £750,000 worth of duty-free goods coming from India.