India must Offer Phased Tariff Liberalization for Wine Imports to gain Market Access for its Exporters, says ICRIER

· ICRIER releases report on ‘“Liberalisation of Wine Trade under India-Australia CECA’

· The threshold under India-Australia ECTA will only Benefit 2% of Australian wine exports and High-Income Indian Consumers

· In FY20, India exported wine worth $7.2 million and imported wine worth $19.55 million

India cannot sign trade agreements with its key export markets without reducing tariffs for alcoholic beverages and must offer phased tariff liberalisation in high growth areas like wine to gain market access for its exporters, a report by leading Indian economic think tank, Indian Council for Research on International Economic Relations (ICRIER) has said.

The report titled “Liberalisation of Wine Trade under the India-Australia CECA” by Arpita Mukherjee and Drishti Vishwanath, published by Academic Foundation, focuses on the scope for liberalisation of tariffs in wines and removal of non-tariff barriers under the India-Australia comprehensive agreement (CECA), due to be signed in December 2022. While Indian consumers’ want access to quality wines at cheaper rates, the threshold price of bottled wine that has been liberalized under the ECTA is over US$5 and US$15 CIF. Thus, the duty reduction benefits only the upper end of wine imports and high-income consumers. The rest of wine imported from Australia – about 98%, which is consumed by middle income consumers - continues to attract a duty of 150%. The report proposed a maximum threshold of USD25 per case of 9 litres/12 bottles of 750 mil /(FOB), which benefits the wine industry in both countries, reduce prices for middle-class consumers and enable the Indian hotel and tourism industry to grow.

Among alcoholic beverages, tariffs are the highest for wine, with the price of imported wine ranging at between 200 and 400% of the global average price. For more than two decades, countries such as Australia and the USA have expressed concerns about the high import duties, which act as a major disincentive for wine exporters from these countries/regions to India.

The report was released by H. E. Mr. Manpreet Vohra, High Commissioner, High Commission of India, Canberra, Australia, H. E. Ms. Sarah Storey, Deputy High Commissioner, Australian High Commission, India, Mr. Kuntal Sensarma, Economic Advisor - MoFPI, GoI, Mr. Anil Wadhwa, Former Ambassador; Distinguished Fellow, Vivekananda International Foundation (VIF) and Dr. Deepak Mishra, Director & CE, ICRIER in New Delhi. The release was followed by a panel discussion on “Enhancing Trade and Collaborations in Wines under the India-Australia CECA”.

According to the authors, the ECTA does not cover bulk wine imports, which could fructify “Make in India” plans. Reduction in the threshold level along with zero duty on bulk imports in the forthcoming India-Australia comprehensive agreement in December this year will enhance B2B collaboration, investment inflow and manufacturing in India. With Australian partnerships, “Made in India Wines” can gain popularity and consumers will have access to a wide variety of products. Further, the Australian industry sees India as a rising market for wine in the next 5 to 10 years. It is not only interested in exporting to India, but are also keen to forge alliances that could lead to future "Make in India" initiatives. Indian wine manufacturers pointed out that there is tremendous scope for collaboration with Australian companies to explore new export markets jointly. Since both India and Australia have a large number of SMEs in this sector, both countries should promote SME collaboration through buyer & seller meets and through government funding of other marketing initiatives.

Speaking on the launch, H. E. Mr. Manpreet Vohra, High Commissioner, High Commission of India, Canberra, Australia, said “We have reached a landmark agreement on 2nd April. This is India’s first FTA with any developed country in decades. It is the first time that India has agreed to a reduction of tariffs on wine. This demonstrates the fresh thinking of new India today. I compliment the negotiators on both sides for being flexible and responsive and ensuring the provisions are win-win for both sides. Australian wines are enjoying a predominant position in India even before ECTA and I have no doubt this will be further bolstered with the agreement. Wine consumption in India is only about 1 percent of the total market for alcoholic beverages but growing very rapidly among the urban middle class and the youth”

The consumption of wine in India is currently low due to high tariff and state-wise levies but it is expected to see a strong growth in the coming years due to multiple factors like rising disposable income, rapid urbanisation, increasing availability of locally produced and imported wines and growing popularity of vineyards as tourist destinations. According to the report, wine consumption increased by nearly 46% between 2008 and 2018 with national wine consumption estimated at about 30 million litres per annum.

Commenting on the launch, H. E. Ms. Sarah Storey, Chargé d'Affaires, Australian High Commission, India, further added “ICRIER’s report demonstrates very well how the benefits of continued trade and liberalization will support growth and investment in the Indian wine sector. Currently, duties on Australia exports to India are 150 percent. Under ECTA, this will reduce to 50 percent and reduce to 25 percent 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 they are thinking of a long vision stretching to 2050 and beyond.”

The report further states that over 200 'bottled in origin' brands were imported into India as of May 2021. Penfolds, Lindeman's, Westend Estate, Jacob's Creek, d'Arenberg, De Bortoli, and McWilliam's Wine Group are among the 40 Australian wine firms that export to India. There are an estimated 50-100 wine importers in India who have now expanded their portfolio to include Australian wine.

Mr. Kuntal Sensarma, Economic Advisor - Economic and Trade Division, Abattoir and NMPPB, Skill Development, FSSAI, MoFPI, GoI, said, “In a record time of 88 days, we have concluded the signing of ECTA which shows the commitment of the Indian government and trade ministers and demonstrates how globalization and bilateral trade can help the development of the economy. The Ministry of Food Processing Industry has played a very critical role in this negotiation, particularly in regard to the wine sector.”

Given that India for the first time liberalised the alcoholic beverages sector in its Interim agreement with Australia, this report will provide the roadmap for the country’s negotiations with trade partners like the EU and the UK. The report will help policymakers negotiate trade agreements, sector experts to provide inputs into trade negotiations and scholars to understand the nuances and complexities of negotiating a trade agreement.

Speaking on the occasion, Dr. Deepak, Mishra, Director and CE, ICRIER, said, “As Governments of the two countries are establishing the Joint Dialogue on Wine for information exchange and trade related matters, we hope that the recommendation of this study will feed into that discussion. Given the complementarities between the two countries, there is scope for further liberalisation, regulatory cooperation and business-to-business collaboration, especially among small and medium enterprises, under the comprehensive agreement”.

About ICRIER

ICRIER is an autonomous economic policy think tank, in operation since 1981. ICRIER’s focus is to help Indian policymakers make informed decisions, facilitated through its rigorous analytical research, objective policy advice and extensive networking events. For more information see http://icrier.org/