London, March 29:

Indian budget for 2006-07 dampened the spirits of Scotch industry here when no tax concessions were announced. But now the industry hopes that European Union will intervene to ensure fair access to the country’s large spirits market.

For some time the Scotch Whisky Association (SWA) has been lobbying with India to reduce the basic customs duty on the import of Scotch, but without success. The SWA claims that the high import tariff on Scotch had given rise to a flourishing market in counterfeit products in India.

Lowering the tariff would not only ensure that genuine Scotch reached consumers but also bring India’s tax structure in line with WTO regulations.

According to the SWA, market access to India for Scotch whisky and other imported spirits is unfairly restricted by a discriminatory fiscal regime, which is contrary to international trade rules.

The overall duty burden faced by Scotch whisky ranges from 212 per cent to 525 per cent, SWA says. SWA sources confirmed that after the budget - considered “disappointing” within the industry - there has been no contact with the Indian government. The industry is waiting for a report by the EU on India’s import regime as relevant to the spirits industry.

Europe’s wine and spirits industry had lodged a complaint under the EU Trade Barrier Regulation procedure in July 2005, seeking a level playing field for European spirits manufacturers and Indian producers. The EU report is to be released in April. David Williamson, senior SWA official, said that after the EU report was released, the SWA would consider the option of persuading the EU to take India’s allegedly discriminatory import regime to the WTO for dispute settlement.

Scotch industry sources believe that one of the major opponents to lower India’s tariff is noted industrialist-politician Vijay Mallya, who has major interests in India’s spirits industry.

Mallya has often criticised the SWA for allegedly preventing the sale of Indian whisky in Britain and Europe, while the SWA sees him as a major roadblock in securing access to India’s spirits market.

Without naming him, the SWA said that after India’s budget failed to announce any concessions, “Domestic interests appear to have outweighed international commitments and, as a result, market access continues to be unfairly restricted by a protectionist tariff and tax system.”

The SWA refutes Mallya’s charge on the ground that spirits produced by Mallya’s companies do not meet EU definition of whisky - that it should be made from cereals and not molasses - and as such cannot be marketed in Europe as ‘whisky’. The SWA had no objection if it were called ‘spirits’ instead of ‘whisky’.

In line with traditional practice, the EU requires ‘whisky’ to be produced from cereals and aged for a minimum of three years, at a strength not less than 40 per cent vol.

“In India, there are no mandatory definitions of spirit drinks and many Indian products labelled ‘whisky’ (and brandy and gin) are produced from molasses alcohol, and are not subject to a minimum ageing requirement.