New Delhi: The European Union has finally run out of patience and has decided to move the World Trade Organization (WTO) against India for its failure to reduce import duties on spirits and wines.
Reacting to the announcement, commerce ministry officials said they were still hopeful of settling the issue amicably.
In a statement issued from Brussels, EU trade commissioner Peter Mandelson said, “India has maintained extremely high duties on imported spirits and wines for many years. They restrict European exports and are in clear breach of WTO rules. As we could not resolve our dispute in consultations, the EU sees no other way than to request the establishment of a WTO panel. We are of course not closing the door to an amicable solution—but the ball is now in India’s court.”
The EU has asked that the panel request be placed on the agenda of the Dispute Settlement Body meeting on 11 April.
A dispute panel will examine the issue, in a process that normally lasts 10-12 months, and give a ruling on whether they are contrary to WTO rules. Thereafter, both sides have the possibility to appeal against the panel’s ruling to the Appellate Body of the WTO. The final ruling is legally binding, and if India is found to have violated WTO rules, it will be obliged to implement it. In case of a failure to implement the ruling, the EU may be authorised by the WTO to impose duties in retaliation against Indian exports.
Commerce Secretary G K Pillai told Mint, “we are still in discussions with the EU and are still hopeful of settling the issue amicably.”
Ministry officials said that efforts were on to table a Bill in the current Budget session of Parliament to empower the states to levy a tax in lieu of the Additional Customs Duty on imported wines and spirits.
The additional duty (of 150% for spirits and 100% for wines), is regarded by the EU as discriminatory since it raises the cumulative duty burden to between 264% and 550% (depending on the import price of the products). The levy in lieu of the additional duty will be at par with the state excise duties on local wines and spirits.
“A cabinet note regarding the Bill is expected to be cleared in the next two weeks following which the Bill will be introduced in Parliament after the recess,” an official, who did not wish to be identified said.
The decision for seeking a panel follows an investigation carried out in the framework of the European Union’s Trade Barriers Regulation at the request of the European Spirits Organisation and the Comité Européen des Entreprises Vins. The investigation had concluded that access to the potentially large Indian market for spirits and wines is severely restricted due to a high duty burden, contrary to internationaltrade rules.
According to the EU industry, the Indian market for spirits is one of the largest in the world amounting to 87 million nine litre cases. The corresponding figure for wine is 667,000 nine litre cases. EU exports of spirits to India in 2004 amounted to € 23.3 million while wine exports amounted to over € 4 million.