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Boby Kurian

BANGALORE, Feb. 8

CONSENSUS has eluded talks between multinationals and Indian liquor lobbies on the fizzy issue of taxing bottled-in-origin (BIO) liquor in the run-up to the budget for the financial year 2003-04.

For the third year in succession after lifting quantitative restrictions on BIO liquor in 2001, both the camps failed to agree on the vexed issue of additional duties, which was imposed to protect the domestic industry from cheap imports. At present, the basic customs duty stands at 182 per cent ad valorem, while the additional duty on imports with c.i.f. value up to $25 per case is pegged at 75 per cent ad valorem and on imports above $25 is at 50 per cent ad valorem. The bitter battles in the past, which included diplomatic pressure on New Delhi, had prompted both the multinationals and the Indian companies to negotiate for an agreeable formula before the next budget. While the domestic lobby continued to pitch for additional duties stating that India was "still a ripe market for cheap imports of gin, vodka, brandy and other admixes," the multinationals saw it as a trade barrier "incompatible with WTO" making their frontline brands such as Johnnie Walker or Jack Daniel's "prohibitively expensive in the retail market."

The industry sources said the FICCI sub-committee - under the leadership of the UB Group Chairman, Mr Vijay Mallya, and consisting of representatives from both MNCs and domestic companies - has failed to deliver a workable formula. "There is no consensus for this budget. But talks will continue to arrive at a solution on the taxation of imported liquor," sources said. It is learnt that representatives of MNCs suggested that the additional customs duty and the special additional duty might be replaced by a specific rate of duty of Rs 100 per bulk litre. But the proposal "did not fly much", sources added.

The Joint Working Group (JWG) on Customs Duty on Alcoholic Beverages constituted by the Union Government, which saw the participation of various State excise commissioners, has suggested a new regime of additional duties, which has ruffled the multinationals. The JWG report available with this newspaper has recommended a three-tier additional duty structure besides keeping the customs duty at "the highest rate permissible". It must be mentioned that India is committed to lower basic customs duty to 150 per cent by 2004. It has suggested the creation of a third tier of additional duty at 150 per cent on imports priced up to $10 per case. The report has sought hiking of existing additional duty of 75 per cent to 100 per cent on imported liquor priced between $10 and $20 per case and retention of the existing 50 per cent for imports priced above $20. The report said it examined the duty structure from two parameters: "whether the levy of additional duty on alcoholic beverages is WTO compatible and whether the present rates are reasonable or in excess of the requirement of ensuring a level playing field to the domestic industry."

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