THE Scotch whisky industry is poised for a surge in sales to India following indications that the country will reduce its punitive import duties.
Industry sources expect the Indian government to announce a cut in next month's budget to comply with World Trade Organisation rules.
India is under international pressure to reform the system which subjects all imported spirits to an additional
duty of between 25% and 550%. Recently both the US and Australia have added their weight to the WTO consultations.
Publicly, the industry is still adopting a wait-and-see approach but privately many are now preparing for reductions in February's budget with a view towards complete access by 2012.
One industry executive who has just returned from a visit to India said: "The signs are very good. The Indian government realise that with the recent economic growth they need to adhere to the WTO regulations. I think we will see the first evidence of a reduction in the tariffs next month and I expect a totally level playing field within five years."
In recent weeks the Scotch Whisky Association has been making pre-Budget representations to the Indian government and both the Chancellor, Gordon Brown, and the Trade Secretary, Alistair Darling, have raised the issue during their recent visits to India.
The pressure will be upped at this weekend's World Economic Forum in Davos when Peter Mandelson, the European Commissioner for Trade, will lock horns with India's commerce minister Kamal Nath.
Many analysts predict it will be a lively meeting. Effectively India is in the last chance saloon as the EU has made it clear that if no steps are taken to reform the discriminatory regime the matter will be referred to a WTO panel for decision.
India is keen to protect its domestic business, and fears that Scotch's cachet as a drink for the rapidly expanding middle class will quickly erode its market share. Analysts believe domestic interests are using traditional Indian protectionist instincts for "agricultural" or grain-based products to keep Scotch out.
John Wakely, a former managing director of investment bank Lehman Brothers, who has been analysing the drinks market for more than 20 years and is now a strategic consultant, suggested that the potential takeover of Whyte & Mackay by Vijay Mallya's UB Group could force the government's hand.
The two companies are still negotiating over a possible takeover. The major stumbling block appears to be Whyte and Mackay's £500m price tag.
Wakely said: "If Mallya gets Whyte & Mackay he has an obvious incentive to promote lower excise taxes so that he can utilise his distribution channels against the threat of foreign owned vodka companies establishing their own channels."
Despite all the hype surrounding potentially enormous emerging markets in South America and the Far East, they still pale into insignificance compared with that of India. And a snapshot of emerging markets across the world shows that, even with India's exorbitant tariff barriers, the country still buys more Scotch whisky than either Russia, China, Poland or Turkey.
The latest export figures from the SWA show that in 2004 only 700,000 cases were shipped to China, 600,000 to Russia and Turkey and just 200,000 to Poland. This is compared with one million cases sent to India.
The full article contains 554 words and appears in Scotland On Sunday newspaper.
