No duty cuts by India on UK wines under FTA; limited concession on British beer

India will not provide any duty concessions on British wines and is offering only limited import duty benefits on UK beer under the free trade agreement (FTA) between the two countries, announced on May 6, according to an official.

The other sensitive agri products where India will not offer any reduction in the import duty include dairy products, apples, cheese, oats, animals and vegetable oils under the agreement with the United Kingdom.

"Wine is on the exclusion list, along with several other agricultural products in the trade pact. We are also offering only a limited duty concession on British beer," the official said.

India and the UK on May 6 announced the conclusion of the free trade agreement, which will make British Scotch whiskey and cars cheaper in India, while reducing duties on Indian imports like garments and leather products.

As per the agreement, India will reduce duty on UK whiskey and gin from 150 per cent to 75 per cent and further to 40 per cent in the tenth year of the deal.

Not giving duty concessions to the UK on wines is significant, as the EU is a major player in this segment. Any import duty reduction to the UK would have led to pressure on India from the EU to offer similar duty cuts on its wines. Talks for an FTA between India and the European Union (EU) are at advanced stages.

Allaying concerns of Indian whiskey players, the official said the import duty cuts granted to Scotch whiskey under the pact will not significantly impact the domestic market, as the reduction will be implemented gradually over a 10-year period, and the imports are also low.

The domestic wine and beer market is witnessing healthy growth rates on account of rising disposable incomes, urbanisation, and changing consumer preferences.

As per estimates, the Indian wine market is worth over USD 200 million and is expected to reach USD 700 million by 2030.

India has given the duty concession on wines to Australia under a trade pact, which came into force on December 29, 2022. In that deal, tariffs on premium imported wine were reduced from 150 per cent to 75 per cent.

According to reports, India consumes about 40 million litres of wine, including over 15 million litres of red wine and over 20 million litres of fortified wines. White and sparkling wines remain a small segment. India's wine imports stood at about USD 25 million during April-February 2024-25. It was USD 433 million in 2023-24.

The main wine-producing states include Maharashtra and Karnataka.

From the UK, the imports were only over USD one million per year. Main imports were from Australia, Singapore, France, Italy, and Spain.

Similarly, according to reports, the Indian beer market is worth over USD 6 billion and is expected to reach USD 15 billion by 2034.

Beer dominates the Indian alcohol market. As per rough estimates, the country imports beer worth over USD 10 million.

Though India and Britain have announced the conclusion of talks, which started in 2022, it would take over 15 months for the FTA to come into force.

At present, both sides are undertaking legal scrubbing (vetting by lawyers) of the text, and after that, it will be signed and put in the public domain.

"Maybe by August-September, the text would be made public," another official said.

After signing, the ratification process of the FTA would take another year in the UK's Parliament, and only after that, the pact would be ready for implementation.