(GENEVA) - The European Union said Monday it was temporarily suspending its World Trade Organisation complaint against India's import duties on alcoholic drinks after India cut some of the tariffs.

The EU's executive commission said in a statement its decision followed India's July 5 announcement of cuts in import duties on beer and spirits, just over two months after the WTO had set up a dispute settlement panel to rule on the European complaint.

"The EU welcomes the Indian decision to respond to EU pressure by repealing these discriminatory duties," EU trade spokesman Peter Power said.

"EU wines and spirits exporters deserve a level playing field in India. This decision brings us closer to that goal," he added.

However, the EU indicated that it wanted to maintain pressure on India over some unresolved details for the coming months.

The EU said it regretted a "reported" simultaneous Indian decision to effectively raise the tax rate for higher-end wines, partly due to the difference between bound tariffs declared to the WTO and what is actually applied on the ground.

"The European Commission will now continue to monitor the situation on the ground, to make sure that no new discriminations appear at state level," the statement said.

It underlined that the WTO panel would remain in place, even if its work is suspended, for up to one year.

The EU first lodged its formal complaint against India in December 2006.

Subsequent bilateral negotiations failed to resolve the dispute over the tariffs imposed by India's government and some regional state authorities, which amounted to a total of some 264 percent to 550 percent, according to the EU.

The EU subsequently stepped up its action with the request for a WTO panel on April 24.

The Indian Finance Ministry has said its revised additional duties amounted to 20 to 75 percent of the value of beer and wine imports, and from 25 to 150 percent of imports of distilled spirits.

However the basic customs duty on wines was increased from 100 to 150 percent, at the WTO-bound rate, the ministry said.

The European Commission had already welcomed the cuts earlier this month, but made no promise to drop its case before the WTO.

The Europeans rate the Indian market for alcoholic drinks as one of the largest in the world with "particular potential" in the future.

In 2006, EU wine exports to India were valued at 9.3 million euros (12.8 million dollars) while spirits exports there reached 43.3 million euros.

India's 1.1 billion strong population and fast-growing middle class represent a potentially huge market for wine and spirits exporters.

Delhi still faces similar WTO action by the United States, which Washington stepped up with a panel request last month.

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