Diageo to fight Indian whisky taxes

Published: 23 July, 2008

India: The world's largest drinks spirits business has hired consultants to fight the Indian Government in a continuing row over its import duties.

Early this week the International Wine and Spirits Association of India will lodge a letter of protest against the tax with the excise department of Maharashtra, Mumbai's state Government.

The Scotch Whisky Association, Discus and European and Australian producers were this weekend finalising the draft of the letter.

The Australian Government is also expected to come out in overt criticism of the tax this week.

As well as the 200% spirit tax, the Maharashtra state government has levied a new 150% tax on imported wine.

This may already be having an effect.

A senior civil servant at the Maharashtra Excise Commission denied that the tax was being reconsidered.

John Wakely, an independent drinks analyst, said: "This looks set to be a war of attrition, with the SWA having to break down each state individually.

"Like the United States, the alcohol business in India is not just a federal situation.

"If anything, there is far more regulation at the local state level than there is at the federal level.

"This is the main difference between India and China.

"China has a centralised government. The positive of that is that it gets things done. If they decide to build a highway it gets built.

"That is not the situation in India."

So far, Delhi and Bangalore - India's other two largest spirits markets - have not followed Mumbai's lead, as the industry had feared.

According to the SWA, India buys more Scotch - one million cases in 2004 - than either China (700,000 cases), Russia and Poland (600,000 each) or Turkey (200,000).

A spokeswoman for Diageo declined to comment.

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