London, August 1 :

The battle for access to India’s vast whisky and wine market has entered a new phase with the European Union deciding to seek the removal of India’s restrictive import duties under WTO’s dispute settlement mechanism. For several years, makers of Scotch whiskies and wines in European countries have been lobbying with the Indian government for the removal of several layers of import duties. Such duties, they allege, have prevented access to the Indian market and encouraged the circulation of counterfeit products.

Based on a complaint lodged in July 2005 by CEPS (the European Spirits Organisation) and CEEV, the European Commission (EC)- the executive arm of the EU - initiated an investigation in September 2005 and has now concluded that the levy of additional duty and extra additional duty amounted to “blatant cases of breaching fundamental WTO rules”.

The detailed report, compiled on the basis of representations from various stakeholders and a visit to India earlier this year, was handed over to the Indian government last week. The report states that the situation was sought to be resolved through diplomatic means over the last five years and added that “this route has failed to resolve the problem”.

Sources in the Scotch Whisky Association (SWA) - one of the key parties to dispute - accuse Indian liquor producer-politician Vijay Mallya of ensuring that the restrictive import duties are not removed, thus preventing EU companies from accessing the multimillion-pound Indian market. On his part, Mallya has often accused the SWA of hostility and preventing Indian whiskies from being sold in the European markets.

Unless India moves to abolish layers of import duties for Scotch whisky and wine, the EU will take the case to WTO for settlement, which may lead to retaliatory measures by EU. The report alleges that the investigation “has been marked by the refusal of Indian government to cooperate effectively. That refusal is unprecedented. It has hampered, to some extent, the efforts of the Commission services to conduct a timely examination. The Indian authorities, Indian producers and associations of Indian producers failed to reply to the questionnaires”. It adds that all individual Indian producers of wines and spirits refused the invitation to meet Commission officials during their visit to India.

The complaint against India’s import regime for Scotch whisky and wine is that the duties were inconsistent with Articles II, III and XI of the GATT 1994. According to the report, the investigation has confirmed that the imposition of Additional Duty and the Extra Additional Duty constitute blatant violations of the WTO obligations.