Duty On Bourbon Slashed. Will Tariff On Scotch Be Cut Too?

Only time will tell the extent to which this measure can improve volume sales of bourbon whiskey in India. However, the questions which arise as a result are whether the UK will now use the slashing of duty on American bourbon whisky as a precedent for stepping up its own demand on the tariff reduction from India on Scotch whisky, and what the Indian response could be to such a stance being adopted by the UK.

Currently, India imposes a 150 per cent duty on Scotch whisky, the UK’s biggest food and drink export worldwide. Prior to the recent reduction, India levied a 150 percent duty on American bourbon whiskey too.

Although India has been agreeable in principle to reduce the duty on Scotch whisky during FTA (free trade agreement)-related talks with the UK, the two sides have been unable to arrive at an understanding on the subject thus far.

Given the need to balance its finances, it is challenging, though, for India to extend the same level of duty concession to Scotch whisky that it has recently provided to American bourbon whiskey. But then again India would also be unwilling to allow the Scotch whisky duty issue to emerge as a major roadblock in the signing of the FTA with the UK. 

Always a key market for Scotch whisky, India’s importance in the segment’s scheme of things has risen further of late. As per data released by the Scotch Whisky Association (SWA), India regained its position as the world’s number one Scotch whisky export market by volume in 2024, with 192 million bottles exported to the country. 

During 2024, the export value of Scotch whisky to India stood at UK£ 248 million (a 13.8 per cent increase over 2023), making the South Asian nation the 5th largest export destination for Scotch whisky worldwide, in terms of value.

India was also the only country among the Top 5 export destinations for Scotch whisky in terms of value, to report an increase in 2024 compared to 2023. Scotch whisky exports in terms of value to the US, France, Singapore and Taiwan — countries which ranked above India — declined in 2024, vis-à-vis 2023.

With the UK’s newly elected Keir Starmer government under pressure from the Scotch whisky industry to demonstrate that it would back Scotch producers to the hilt, any success achieved in getting India to make a large duty reduction on Scotch whisky could thus do wonders for its image.

While commenting on the 2024 Scotch whisky export figures, SWA chief executive Mark Kent had said: “Overseas, the tectonic plates of trade are shifting, and exports to traditionally strong markets in the EU and North America have become much more challenging. We continue to support the UK government to promote strong and open trade relations with key export markets around the world, and particularly to advance negotiations on FTA with India, and engage with the US administration.” 

The SWA has consistently maintained that India reducing its 150 per cent tariff on Scotch whisky will make the product more affordable for Indian consumers and, also, not harm the interests of Indian companies. The SWA has asserted that tariff liberalisation could raise the market share of Scotch whisky in India to 6 per cent and allow “Indian whiskies and other spirits to retain the dominant share of the market”.

The Indian alcoholic beverage market is dominated by whisky. According to a study conducted by Technopak Advisors, the share of whisky in the Indian-made Foreign Liquor (IMFL) market is expected to rise to nearly 60 percent by volume in FY25. 

In its December 2024 Newsletter, the Confederation of Indian Alcoholic Beverage Companies (CIABC) had said that India’s FTA talks with the UK and the EU in 2025 could significantly impact the alcoholic beverage sector.

“While past discussions focused on high import duties — 100 per cent on wines and 150 per cent on spirits — upcoming negotiations may shift attention to bulk alcohol, which constitutes over 90 per cent of alcohol imports. This focus could benefit local producers of Indian-made foreign liquor (IMFL) and bottled-in-India (BII) products, especially as demand for premium scotch rises,” the CIABC had pointed out.

(The writer is a current affairs commentator. Views are personal)