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California wine may become cheaper in India

April 10, 2007 19:22 IST

Good news may be in the offing for wine connoisseurs in India.

If the United States has its way in the World Trade Organisation, Indians may soon be able to savour the famed Californian wine for a much lesser price.

The US Trade Representative has requested the WTO for dispute settlement consultations with India over customs duties India imposes on imports of wine and distilled spirits.

On top of its basic customs duties, the USTR said, India imposes an 'additional duty' and 'extra additional duty' on imports of wine and distilled spirits, resulting in aggregated duties on these imports ranging from approximately 150 to 550 per cent.

USTR said that, in the WTO, India committed that its tariffs on wine and spirits would not exceed 150 per cent.

"With its fast-growing middle class, India could be an important export market for American wines and distilled spirits if not for these layers of duties," said US Trade Representative Susan C Schwab. "We have raised this issue with the government of India on several occasions over a number of years," Schwab, whose office made the request for settlement to the WTO last month, said.

Although traditionally Indians have been given to hard liquor, tastes seem to be changing these days. An International Herald Tribune report said last month that people are becoming more health conscious. "Red wine is seen to be healthier than a whiskey soda. And there's an aspirational element as well -- people are more exposed now to Western styles, they travel to London and New York and don't see so much whiskey being drunk there," Rajeev Samant, founder of Sula, one of the most popular wineries in India, was quoted as saying.

The United States, USTR said, has raised its concerns regarding these duties with India several times and over a number of years, including through senior US officials.

In November 2006, the EC requested WTO consultations over the duties. The United States and Australia requested to join these consultations, but India denied both requests.

The US made the request under WTO rules that permit parties that do not resolve an issue through consultations to refer the matter to a WTO dispute settlement panel.

Europe and the United States are the world's top exporters of distilled spirits whereas Europe, Australia, Chile and the United States comprise the world's top exporters of wine.

The USTR said that, in cases where wine and distilled spirits may enter India under special duty-free rules, such as for airport duty-free and use at luxury hotels, US exports of these products to India have grown by 350 per cent and 200 per cent respectively, between 2000 and 2005.

However, because of the high duties imposed on the vast majority of American wines and spirits, total exports to India remain low.

Between 2000 and 2005, US exports of wine and spirits worldwide averaged approximately $630 million and $633 million respectively, making the United States the world's sixth largest exporter of wine and third largest exporter of spirits.

But in 2005, wine exports to India from the US, the sixth leading wine exporter in the world by volume, were a paltry $376,000.

"We hope the matter can be successfully resolved in WTO consultations," Schwab said.

The USTR action was hailed by the Wine Institute, an association of more than 1,000 wineries and affiliated businesses of California, the state that accounts for 95 per cent of US wine exports.

The institute seeks to initiate and advocate state, federal and international public policy to enhance the environment for the responsible consumption and enjoyment of wine.

Although the WTO has not given its ruling on the issue so far, there were indications that India may budge from its position on the duties.

News reports said that New Delhi might move a Bill in Parliament to lower customs duty on imported wines and spirits following increased pressure by the European Union and the US at the WTO. The legislation to be tabled in the national legislature next month is expected to retain the basic customs duty but scrap the additional customs levy.

Suman Guha Mozumder in New York