Under pressure from US and EU, which have dragged it to the WTO over high duties on wines and spirits, India has decided to scrap Additional Customs Duty of up to 150 per cent on these products to make the tax structure compatible with its international commitments. "We are planning to scrap ACD by July and allow states to impose taxes equivalent to the levy on domestic wine and spirit makers," a senior Commerce Ministry official said.

He said this would be done through an executive order and there was no need to bring a central legislation for allowing states to levy additional taxes.
So we are seeing the end of the tunnel, so far the import duty reduction is concerned. This should be music to the ears and a burst of fuirt flavours to the foreign producers and the Indian consumers.
The possible reduction of import duties has not even happened yet but the Indian wine industry has started reacting negatively to it. They feel that the lowering of duties will make India a dumping ground for the cheap imported wine that will hurt the Indian wine industry.

Earlier the government had announced that it will pass a legislation which will authorise the states to charge a maximum of the same excise duty on imported wines as the domestic products. Since the excise on the Indian made wine is generally much lower, it is assumed that in most states the prices will come down.

Recently, however, the government sources had announced that the agreement had been reached by states wherein they had agreed to this government initiative and only an executive order would do.. Any which way one looks at it, the reduction was imminent.

This will naturally put pressure on the Indian industry who has been cheering and Sante-ing all the way to the bank with growth of over 60% being the norm among the top producers. With the shortage of good quality grapes and the unprecedented increased demand, the top three producers had increased price on the majority of their wines during the last two months.

Champagne Indage, the number one company withdrew its well-known offer of buy-one-get-one free offer to the dealers across the board offer on its table wine Riviera which has been the national brand till recent years, thus hardening its price by as much as 50% in Chandigarh and Mumbai where sales prices are flexible.

Sula entered a decade ago and spoilt the party. Even Sula has increased the price on its Dindori Reserve Shiraz by over 15% (from Rs,550-600 to Rs. 700; €13, ostensibly to allow it to age the wine in barriques longer, thus increasing the cost. In fact, the wine has turned out to be of fine quality and is amenable to ageing but is always in short supply due to the limited supply and increasing demand, created by better product and slick marketing.
Sula has been business savvy by getting the 'Dindori' brand registered after the name of the village in which majority of its vineyards are located. This amounts to a brand name like Sancerre, Pouilly Fuisse or Marlborough and will pay them richer dividend in future.

Sula had also increased prices on its other labels, though by lesser margins.

Grover, the third brand belonging to the Grover family, which makes French style wines in consultation with Michel Rolland, and was ranked as the fifth most influential family of India by the French magazine, Le Monde for its efforts, had hiked the price on its Shiraz based La Reserve, the wine that was selected by Steven Spurrier as the World's Best red wine from the New World, in 2005, from Rs.440 to Rs. 540 (€ 9), a whopping increase of over 20%.

Out of the two giants that are just entering the market by buying grapes from the farmers, Seagram's is already pricing its one-vintage-old Nine Hills at Rs. 480. Beer king Vijay Mallya's new entry into the market has not taken place though the infrastructure is in place with its Business Head (wines), the ex-Grover VP, Abhay Kewadkar quoted as saying, ' This would lead to the heavy reduction in the prices of imported wine and make India a dumping ground for cheap and sub-standard liquor imported from European countries.

Recently an Indian Sommelier was quoted as rueing, "Indian wines are not comparable to even the worst of French wines.'

The opinions will be divided as can be expected. India makes some very good wine and plenty of cheap wine, like the rest of the world. There is no doubt that it has benefited the most by various efforts to promote the wine culture., taking a lion's share of the increased market, due to high duties. Perhaps, it will be a more level playing field now

But the recent trends exemplify how Indian businessmen are shrewd and comparable to the best in the world in converting opportunities into maximizing their profits. It will be interesting to see how they react to the changes when they take place. Will they roll back the prices?

Hapless consumer has been the lonely loser in the whole ball game till now. One hopes the lower prices will induce more people to drink wine and the consumer will have a wider choice with the prices on imported wines falling by a third.

It is interesting to note that if the CVD (ACD) is scrapped in full, the customs duty alone would be 100% (plus, of course, the excise duties imposed by the states). WTO agreement allows for a duty of 150%. Will the government increase taxes from 100%-150%- a usually budget exercise? We shall have to wait and watch.

Meanwhile, CHEERS!

Subhash Arora
from Venice