India-UK FTA pits Indian whiskey makers against the Scottish
Amid the ongoing discussions over the proposed free trade agreement (FTA) between India and the UK, a tussle has ensued over 'angel's share' that has pitted Indian whisky makers against Scottish brands.
The UK has a big business in India for its scotch whisky. Among its many demands in the ongoing discussions over the agreement, is a reduction in the import duty on scotch whisky, which is currently at 150%. It is also asking for a maturity age of three years for the spirit to be classified as whisky. However, Indian makers have argued that with weather conditions being hotter here, they will lose more than one-third of the whisky due to this condition, the TOI reported on Monday.
And when it comes to FTA, the Indian spirits makers are also seeking a minimum import price of $5 (at cost, insurance and freight level) when international companies are shipping their products to their subsidiaries in India under transfer pricing, to prevent the practice of under-invoicing.
Indian makers are against the proposal of their UK counterparts, who want to reduce the import duty from 150% to 75% immediately at the signing of FTA, and thereafter to 30% over a period of three years. "We are open to a reduction but not at the scale which they are suggesting. We want it to be reduced progressively to 50%, but over 10 years."
Earlier this year, India's alcohol industry has flagged a 40% increase in whisky imports in the first eight months of this financial year against the full fiscal 2021-22, amid the ongoing India-UK negotiations on a free trade agreement (FTA).
It said an increase in imports disproves the UK's claims that Scotch whisky is not being given enough opportunities in India.
India's whisky imports in April-November 2022-23 were worth $278.47 million as against $199.02 million in full FY22. Of this, imports from the UK were almost $200 million in the first eight months of this fiscal year, compared with $148 million in the full fiscal year ended March 2022.
Angel's share refers to the alcohol that evaporates while it is stored in wooden casks for maturation and ageing before turning into whisky. According to legend in the spirits industry, the "angels come and drink their share of alcohol" as it matures in casks housed in dingy cellars.
"In Scotland, it is colder than in India and the loss of spirit per year from a barrel is only estimated at 1-1.5%. In India, the weather is hotter and our whisky matures in just nine months compared to their three years. If we keep the whisky in the casks for a longer time, the per year loss due to evaporation and heat is 10-12%, which means in three years we lose roughly around 35% of the spirit stored in a barrel. This is a big loss and will also harm the quality of our whisky. The conditions being dictated by the UK are unacceptable and unaffordable. We are importing to the US, South America, and Africa without any such unfair conditions," Vinod Giri, director-general of Confederation of Indian Alcoholic Beverage Companies (CIABC), told TOI.
The Indian spirits body CIABC has members such as Mohan Meakin (owner of brands such as Old Monk rum, and Solan No 1 whisky), Radico Khaitan (8PM whisky and Rampur Single Malt), Tilaknagar Industries (Mansion House Gold Whisky), Devans Modern Breweries (GianChand Whisky), Amrut Distilleries (Amrut Single Malt), and Jagatjit Industries (Aristocrat Whisky).
CIABC has made several pleas to the Indian government on the matter as the latter negotiates the FTA and its various provisions with the UK government. "These laws around the maturity of the whisky were made by the British as per their climatic conditions. To allay their fears around quality of our products, we are even open to the idea of UK labs testing our whisky if they are concerned about its maturity. Also, we are ready to mention that our whisky is matured for less than three years."
Giri said that they have been assured by the government that the views of Indian whisky makers have been put forward in the negotiations. "However, we understand that the British side is refusing to accept our plea. They are not willing to give market access."