EU officials say they are determined to make India drop its high import tariffs on wine and spirit drinks, after the country refused to stand before a dispute panel at the World Trade Organisation.
One Commission source said the EU had expected India to block the first approach for a World Trade Organisation (WTO) dispute panel, which would rule whether or not India 's import tariffs on wine and spirits were illegal.
India blocked a World Trade Organisation investigation of its import duties on European wine and spirits on Tuesday, temporarily delaying a dispute that could also soon involve the United States . Another approach is set to be made within two weeks, and India would be unable to refuse a second time.
Wine and spirit producers from Europe and elsewhere have become increasingly frustrated at import tariffs in India, which they see as a lucrative emerging market.
Commission officials were in India this week for talks.
Rumours have surfaced in India this week that authorities may be willing to lower tariffs without WTO intervention. New legislation could be passed in India before a dispute settlement ruling is delivered, said an unknown source quoted by PTI.
A WTO panel takes about 12 months to reach a decision, giving India time to play with.
But a split between India's commerce and finance ministries is understood to have held up progress, with treasury officials concerned about potential lost tax revenue.
Michael Mann, spokesman for the Commission warned a new law to lower tariffs would not be enough. "It's not a question of lowering them, they have to be gotten rid of."
Both the US and Australia have also opened 'consultation' with India at the WTO, the first stage of the dispute process. The U.S. may ask for a formal investigation as early as May if the two sides fail to reach an agreement.