Scotch whisky makers seek Indian improvements

- Last updated on GMT

Related tags: Scotch whisky industry, International trade, Scotch whisky

Scotch whisky producers have fought long and hard in recent years
to improve the market access for their product, mainly by seeking
an equality of treatment with local products.

In Chile, for example, local spirit pisco was favoured by the authorities in Santiago and benefited from a far lower duty rate than imported Scotch, until the Scotch Whisky Association successfully lobbied against the discrimination.

The SWA also won similar victories in South Korea, where local spirit soju was favoured, and in Taiwan, where imported spirits in general were subjected to high duty levels.

The latest country on the SWA's hit list is India, where Scotch is subjected to import duties of between 246-592 per cent, and where imported spirits are priced far out of the reach of most consumers.

As in previous cases, the SWA is not fighting this battle alone. So important is the Scotch whisky industry to UK exports that the British government has given continued support to the association's efforts for a fairer trading environment - ironic, given the heavy tax burden it imposes on spirits at home.

Trade Minister Mike O'Brien is visiting New Delhi this week and will raise the issue of import duties with his Indian counterpart, according to Tim Jackson, director of international affairs at the SWA, who will accompany the minister.

"The Scotch whisky industry is not seeking any favours, just fair market access. We recognise the Indian government has taken steps in the right direction by reducing the Federal duty burden in the last two budgets. However, the overall duties levied on Scotch whisky are excessive by international standards, and more favourable tax arrangements apply to local than imported spirits,"​ Jackson said.

"We will be taking the opportunity of Mr O'Brien's visit to urge India to continue this process by reducing the duty on Scotch whisky to a more pragmatic level, as well as addressing its unfavourable fiscal treatment between imported and domestic spirits, in the 2004 budget. This would discourage illicit trade in the market to the benefit of the consumer and the Indian government, whilst allowing international spirit drinks fairer access to an important 70-80 million case spirits market."

The massive potential for whisky in the Indian market explains both why the Indian government is keen to keep taxes as high as possible and why Scottish producers want them reduced. A report from Canadean​ published last year suggested that India was now the largest global market for whisky, in all its variants, with consumption reaching 52 million cases in 2002, some 20 per cent higher than that of the US, the second-largest market.

For 2003, Canadean predicted that India would further strengthen its position with consumption likely to rise to 55 million cases.

But the market is fuelled almost entirely by Indian whisky, which accounts for over 99 per cent of total consumption, and it is the unfair fiscal advantage that this product holds which the SWA is trying to combat.

The success of Scotch whisky exports to South Korea following the elimination of import duties clearly shows the importance of a level playing field. Whisky consumption there has more than doubled in the last four years, and exports to South Korea were £98 million in the first half of 2003, a 4.6 per cent improvement on the previous year.

Scandinavian restrictions lifted

But restrictions on the sale of Scotch whisky are not limited to far flung corners of the world. The industry has for some time been fighting draconian regulations much closer to home - in Scandinavia, to be precise, where concerns about alcoholism have kept import duties and taxes excessively high.

However, this week saw the lifting of restrictions on the import of whisky and other spirits in Denmark, Finland and Sweden after pressure from the SWA and other organsations pushed the European Commission to take a tough stance on compliance with internal market rules.

Previously, individuals were only able to import one litre of spirits into Finland, 1.5 litres into Denmark, and 5 litres into Sweden, but as of 1 January, each country is now be required to comply with EU regulations that permit the unlimited import of duty paid spirits for personal use.

Gavin Hewitt, SWA chief executive, said that the removal of the restrictions on the import of Scotch to Scandinavia is was the result of hard work by the industry in recent years to persuade Denmark, Finland and Sweden to comply with EU rules.

"Ahead of these restrictions being lifted, we have also seen an encouraging trend of spirits taxes being cut across Scandinavia to remove the incentive for cross border shopping or illicit trade. Following on from Denmark halving its spirits tax in October, Finland has also announced it will cut the duty on Scotch by 44 per cent on 1 March. We believe there will now be increasing pressure for Sweden to follow suit."

Exports of Scotch whisky to Denmark, Finland and Sweden were worth a combined £40.5 million in 2002, the SWA said.

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