The Indian liquor sector stands to benefit from the free trade agreement (FTA) which will be signed between India and United Kingdom (UK), say analysts. Among the many proposals as part of the FTA, the sector is likely to see a steep cut in the import duty for whiskey which is currently at 150 per cent and it will be gradually brought down to 30 per cent over the years.
The government would gradually slash import duty on high-end products from 150 per cent to 100 per cent in the first years, 50 per cent in the second and 30 per cent by the end of the third year once the FTA is signed between the two countries. This move is also expected to open a big export market for liquor in the UK, according to media reports.
The UK government has also agreed to give relief on maturation condition to Indian whiskey exporters. Under the maturation condition, liquor with three years maturity will be sold in the UK and the UK government is planning to create a separate category for Indian liquor which will be called Indian imported liquor to help Indian liquor exports.
India exported about $400,000 worth of alcoholic beverages in 2021-22 against imports to the tune of $192 million from the UK, according to government data.
“By removing a whopping 150 per cent tariff on Scotch whiskey in India, a key market for the category, this FTA is expected to boost the sector's exports to the country by £1 billion ($1.2 billion) over five years. By removing the tariff, Scotch whiskey's market share would triple from 2 to 6 per cent and consumers would have more choices,” says Manoj Dalmia founder and director at Proficient Equities.
The move will also help Indian liquor exporters as UK has decided to create separate category of Indian imported liquor, says Ravi Singh of Share India.
“The UK government is planning to create a separate category—Indian imported liquor, to help Indian liquor exports from maturation condition. Shares of the companies which import products from Britain would stand to gain the most through this FTA agreement,” says Singh.
Meanwhile, Indian liquor industry has also benefitted a great deal from the Russian invasion of Ukraine and the resultant energy and food grain crisis in Europe.
After the supply chains were disrupted following the war, a lot of manufacturing contracts were given to Indian companies and they started making beverages for many global clients, says Vijay Chopra of Enoch Ventures.
There was shortage of beer and liquor because production became unviable due to and Ukraine being a major supplier of food grains and the problem of liquor supply aggravated in Europe, he says.
“There are companies like Piccadily Agro, PI Industries, SDPL which are doing contract manufacturing and they are also gaining business because food grain availability and water is also not a concern in the country,” says Chopra.
