Reduce threshold price for duty cuts on wine under India-Australia FTA: ICRIER report

There is a need for reduction in the threshold price for bottled wine eligible for duty cuts and extension of zero duty on bulk imports in the expanded India-Australia free trade agreement to be negotiated as it will boost collaboration, investment inflow and manufacturing, a study by research body ICRIER has highlighted.

With Australian partnerships, ‘Made in India’ wines can gain popularity and consumers will have access to a wide variety of products, the report titled ‘Enhancing Trade and Collaborations in Wines under the India-Australia CECA’ pointed out.

‘Thinking of long vision’

“Currently, duties on Australian exports (of wine) to India are 150 per cent. Under the ECTA (Economic Cooperation and Trade Agreement), this will reduce to 50 per cent and 25 per cent (for different price ranges) over a decade. The report outlines clearly that we can do so much better. Australian and Indian negotiators should aim for more ambitious outcomes. Our wine producers are innovators and producers who are thinking of a long vision stretching to 2050 and beyond,” Sarah Storey, Chargé d’Affaires, Australian High Commission, India, said at the launch of the report on Thursday.

Australian wines enjoyed predominant position in India even before ECTA and would get further bolstered with the agreement, said Manpreet Vohra, Indian High Commissioner to Australia. “Wine consumption in India is only about 1 per cent of the total market for alcoholic beverages but growing very rapidly among the urban middle class and the youth,” he said.

Consumption of wine in India increased nearly 46 per cent between 2008 and 2018, the report pointed out. National wine consumption is estimated at about 30 million litre per annum.

Reduction of duty

Per the ECTA, customs duty on wines above $5 per bottle will be reduced from 150 per cent to 100 per cent as soon as the pact is implemented and then to 50 per cent over the next 10 years. Customs duties on wines above $10 per bottle will be brought down from 150 per cent to 75 per cent once the ECTA is implemented and then to 25 per cent over 10 years. While the ECTA will be implemented after it is passed in the Australian Parliament, the two sides are also to start negotiations on a full-fledged comprehensive economic cooperation agreement soon.

The duty reduction is only on about 2 per cent of Australia’s wine exports to India and benefits just the upper end of wine imports and high-income consumers. The rest of wine imported from Australia (about 98 per cent), which is consumed by middle income consumers, continues to attract a duty of 150 per cent, said Arpita Mukherjee, Professor, ICRIER, who co-authored the report with her colleague Drishti Vishwanath.

The report proposed a maximum threshold of $25 per case of 12 bottles of 750 ml, which it said, benefits the wine industry in both countries, reduce prices for middle-class consumers and enables the Indian hotel and tourism industry to grow. The ECTA does not cover bulk wine imports, which could fructify ‘Make in India’ plans of the government, the report stated.

Since both India and Australia have a large number of SMEs in this sector, both countries should promote SME collaboration through buyer and seller meets and through government funding of other marketing initiatives, it added.

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