India-Australia trade pact: India rejects demand for tariff cuts on dairy and wine; second phase of BTA delayed

Time of India

11-07-2025

India has rejected Australia's demand for deeper tariff concessions on dairy and alcoholic beverages, delaying the second phase of a proposed bilateral trade pact, news agency Reuters reported citing two Indian government sources.
The countries signed an interim deal in 2022 that reduced tariffs on a wide range of goods. However, talks on a full-scale Comprehensive Economic Cooperation Agreement (CECA) covering goods, services and visas have stalled, with dairy and wine emerging as key sticking points, the sources said.
'There is no question of agreeing to Australia's demands for further tariff cuts on dairy and wine,' said a senior Indian official directly involved in the negotiations.
The official, speaking on condition of anonymity, cited concerns over potential impacts on millions of Indian farmers, the domestic wine industry, and grape growers.
Australia has been pressing India to reduce duties more aggressively. Under the existing interim deal, tariffs on Australian wine priced above $5 per 750ml bottle were reduced from 150% to 100%, with a gradual target of 50% over ten years. For wine priced above $15, tariffs were cut to 75%, with a target of 25% over the same period.
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Australia now seeks to lower the price thresholds at which cuts apply and accelerate the reductions.
'We'd like to see a reduction in the price at which tariff reductions kick in and a speeding up of those reductions,' said Lee McLean, CEO of industry group Australian Grape & Wine. He noted that high taxes mean even relatively affordable Australian wines, priced at A$10–15 at home, can retail for over A$100 ($65.77) in India.
India's resistance stems in part from growing opposition by farmer groups and politicians in Gujarat — Prime Minister Narendra Modi's home state — and Maharashtra, a major grape-producing region. The Rs 2.9 lakh crore ($35 billion) alcoholic beverages industry has also opposed making further concessions.
On dairy, Australia has sought better access for products such as cheese, high-protein whey concentrate, lactose and processed goods, which currently face Indian tariffs between 20% and 30%.
But India's large and politically sensitive dairy sector remains a barrier.
'Current tariffs are prohibitive,' said Karl Ellis of Dairy Australia. He added that while mainstream dairy exports to India are unlikely, niche items like high-protein whey and select cheeses could help Australia tap into the $30–40 million Indian market, which is now largely served by European suppliers.
Despite the stalemate, officials said both sides are still committed to advancing the pact. India is open to reducing tariffs on industrial and non-agricultural goods, while pushing for greater access to Australia's services market and visa quotas, a second Indian official said.
Australia's Department of Foreign Affairs said negotiations remain backed by both prime ministers and that a completed CECA would enhance bilateral trade and build a more resilient economic partnership.
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