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EU wants India to cut tax on wine, spirit - extended

The European Union wants India to cut import duties on wine and spirits to enable companies such as Diageo Plc and Pernod Ricard SA from increasing their market share in the world’s second-fastest growing major economy.

The EU may approach the WTO seeking a cut in Indian duties, Agriculture Commissioner Mariann Fischer Boel told reporters in New Delhi. India levies a 280% tax on imported wines and a 500% duty on spirits, she said. Sales of spirit makers such as Diageo, the world's biggest liquor company, in Europe have slowed. Lower tariffs on wines and spirits would allow European spirit companies to compete with local companies such as United Spirits Ltd. and increase sales in the world's second-most populated country. Indian companies say Europe subsidizes its farmers and the inputs that go in the manufacture of spirits and wines.  „It is OK for them to subsidize their farmers, but it's not appropriate for the Indian government to protect its revenue,” Ravi Nedungadi, chief financial officer of the UB Group, said in a telephone interview today. „We do not depend on tariff protection for sustainable leadership. We have also been scouting around for an appropriate acquisition overseas.” United Spirits, India's biggest producer of spirits and part of the Bangalore-based UB Group, said in January it is in talks to purchase Scotland's Whyte & Mackay, a whiskey maker. Even though India has high import taxes, the country is the second-largest importer of Scotch whiskey among emerging markets, Nedungadi said. „You have extremely high import tariffs,” Boel said.

„Yesterday, we bought a very good bottle of Indian wine because we could not afford the European one.” India imported €23.3 million ($30 million) worth of Scotch whisky in 2004, less than 1% of its total market, the EU says. That compares with shipments last year worth £46 million to China, where the import duty is 10%, and £370 million worth to the US, the biggest export market for the liquor, the Edinburgh-based Scotch Whisky Association says. Shares of Champagne Indage Ltd., an Indian wine maker, fell 3.45 rupees, or 0.6%, to 620 at 2:10 p.m. local time on the Bombay Stock Exchange. Shares of United Spirits Ltd., the country's biggest spirits maker, rose 4.3% to 703.65. United Spirits profit rose more than 13-fold to 4.44 billion rupees in the nine months ended December 31. Sales doubled to 20.6 billion rupees. Diageo's net income fell to £895 million in the six months through December 31 from £1.17 billion. The London-based distiller's H1 European sales fell 2% and the amount of liquor sold in the region dropped 5%, hurt by higher taxes and smoking bans that prompt consumers to buy spirits at supermarkets and liquor stores instead of bars. (Bloomberg)