India-UK FTA splits liquor sector on Scotch tariff cuts

The India-UK Free Trade Agreement takes effect July 15. It includes phased cuts to tariffs on Scotch whisky imports. The provision has drawn a split response from the liquor industry. Some producers of domestic premium spirits see a threat to their market share. Others in the importing and distribution chain welcome the lower costs.

Domestic distillers worry that cheaper Scotch could eat into their share of the upper-middle segment. They also fear that state governments may reduce the preferential tax treatment some states currently extend to imported brands once the federal tariff drops. State-level pricing and distribution rules often determine how much of a duty reduction reaches the retail shelf. The FTA overrides some local barriers. It leaves others intact, trade officials said.

Importers and franchise distributors view the tariff reduction as a net positive. A lower landed price for Scotch gives them margin flexibility. They can hold prices and improve margins, or cut retail prices to drive volume. Distributors in major cities have expressed optimism about the July 15 start date, according to industry executives.