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Foreign liquor firms push for duty cut

The government should reduce duties on import of spirits in its February 28 Union Budget to increase revenue and reduce smuggling, the regional head of the world's largest drinks group said on Wednesday.

Deepak Roy, president, South Asia, Russia and Baltics of Guiness UDV, a unit of Britain's Diageo Plc, told a news conference effective import duties on spirits that ranged between 464 and 706 percent were too high and should be cut.

He said this would increase imports and revenue to the government while sharply reducing illegal imports.

UDV -- the owner of such famous brands such as Johnnie Walker whisky, Smirnoff vodka, Bailey's Irish Cream and Malibu rum -- has been in India since 1994 and currently has a five per cent share of the domestic market.

India, the world's second most populous nation, consumes about 75 million 12-bottle cases of spirits a year, but imports account for less than one per cent of consumption. Annual spirits consumption produced by the organised industry is valued at over Rs 60 billion.

Despite stiff duties, international liquor firms such as Seagram and Bacardi have rushed to India since liberalisation in the early 1990s because it is one of the few rapidly growing markets in the world.

Roy said the more than doubling of customs duties in the previous Budget to 464 per cent from 222 had resulted in only an 18 per cent increase in revenue.

"But bottled imports (of spirits), after the duty was increased, have declined 42 per cent over the previous year and led to an increase in illegal imports," he said.

In 1999, 25 per cent of the scotch whisky consumed in India was bought from duty paid sources, which has dropped to 10 per cent after imports were freed last April and the import duty on spirits was increased, he added.

Revenue from import duty on liquor could multiply nearly 20 times to Rs 4.87 billion if the government cut basic import duty to 150 per cent from 210, he said quoting a study by the Economist Intelligence Unit and local firm, IMRB.

A bottle of Johnnie Walker black label whisky is available at Rs 1,600 in the black market but costs Rs 4,200 in Mumbai after paying all duties, which encouraged smuggling, he said.

DUTIES TO PROTECT DOMESTIC INDUSTRY

India was compelled by a World Trade Organisation pact to remove quantitative restrictions on all imports from April 1, 2001 but was allowed to slap tariffs on them as compensation.

Last year, the government retained basic duty on imports at 210 per cent and a special additional duty at four per cent.

But it imposed a three-slab additional import duty of 150 per cent, 100 per cent and 75 per cent, depending on the price of the spirits being imported to protect domestic industry.

The government said the additional duty was imposed because domestic firms paid a state excise duty from which foreign companies' imported bottled spirits were exempt.

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