India in advanced talks with EU to 'correct' high liquor duties

(NEW DELHI) - India is at an advanced stage of talks with the European Union to "correct" high duties imposed on imported wines and spirits, the country's commerce minister said on Friday.

The EU and the United States have both lodged complaints with the World Trade Organisation (WTO) over the tariffs, which they see as unfair trade barriers for their wine and spirits.

"We recognise that tariffs are high. We are in talks with the EU... they are at an advanced stage. I believe this situation will be corrected," Nath told a luxury goods conference in the Indian capital.

"We will settle (the dispute) by negotiation," he said.

Combined duties and taxes are as high as 550 percent on imported spirits and as much as 264 percent on imported wine, according to an EU report. Indian wine and spirit tariffs cannot exceed 150 percent according to WTO rules.

French Foreign Trade Minister Christine Lagarde told the conference that France would like to see Indian duties come down, adding that "direct cuts will propel the industry and not hurt it."

"We would like to see more bottles of champagne, cognac and wines to be opened in India," she said.

The EU began formal consultations with India at the WTO on the issue late last year. Consultations are the first step towards resolving a dispute at the global trade body.

Since then, the EU has threatened to haul India before a WTO arbitration panel and the United States earlier this month asked to begin dispute consultations with India over its alcohol duties at the WTO.

If the row is not settled by consultation, it can be referred to a WTO settlement panel. If the panel rules against India, it could impose retaliatory duties on Indian imports.

Earlier this month, Nath told EU Agriculture Commissioner Mariann Fischer Boel that India was trying to find a way to lower the high duty structure for imported wines and spirits.

But he said certain legislative issues linked to the matter would have to be sorted out first, without specifying their nature.

Nath also reiterated a call on Friday for the EU to recognise Indian whisky, distilled from sugar cane molasses rather than cereal, as whisky.

But Fischer Boel said during her visit that EU rules stipulate that a bottle can only carry a whisky label if the content is made from cereals and "otherwise there's no possibility of putting the name whisky (on the bottle)."

A European spirits producers organisation has said EU exports of spirits to India were just 43 million euros (57 million dollars) in 2005 while wine exports stood at seven million euros.