FTA to bring modest dip, not a steep dive, prices of UK spirits

Mint

a day ago

NEW DELHI
:
Indian consumers hoping for the prices of their favourite UK whiskies to drop dramatically after the free-trade agreement need to temper their expectations.
The India-UK Comprehensive Economic and Trade Agreement (CETA), officially signed this week, will reduce the current 150% customs duty on spirits by half to 75% once the agreement comes into force, with a further reduction to 30-40% over the next 10 years. This applies to both 'bottled-in-origin' (BIO) spirits and bulk imports used by Indian manufacturers for blending with Indian made foreign liquor (IMFL). The UK wines and beers are exempt from the deal.
Industry analysts and company executives suggest the immediate impact on retail prices will likely be modest, with reductions estimated between single digits and 10-15%, largely because import duties currently make up only 10-15% of the total shelf price.
Margins still key to retail price
'While this (reduction in duty) is a notable move, its impact on retail prices will be modest in the near term," said Naveen Malpani, partner and consumer & retail industry leader at Grant Thornton Bharat. 'Import duties contribute only a fraction of the final price, with state excise, logistics, and distributor margins forming a large share of consumer cost."
Grant Thornton Bharat estimates retail price drops in the range of ₹100–300 per bottle (8–10%) for premium Scotch.
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Ardent Alcobev Pvt Ltd, which sells Dram Bell—a blended Scotch whisky, bottled in origin—said the move is 'positive" and will enhance accessibility and affordability for Indian consumers.
"The real benefit will depend on how quickly the duty reductions are implemented and whether the states align their tax structures accordingly," said Debashish Shyam, co-founder and director. 'While the final impact on retail pricing will vary by state due to local excise structures and channel margins, this duty reduction has the potential to bring down consumer prices by 10–15% over time."
In a state like Maharashtra, for instance, where Dram Bell is already priced competitively—only marginally above premium IMFL—this development could further narrow the price gap and enhance accessibility.
New markets for smaller players
The move is also helping smaller players get into the market. 'This move will dramatically reduce cost for us and shake up the market, making entry and access easier," said Nishant Sharma, founder of Rutland, a UK-based spirits company that sells gin and rum bottled in Scotland. Once in full effect, a bottle of the brand's gin could cost ₹4,000 from ₹6,000. 'Launching a product like ours into the Indian market is a huge cost, because of the 150% duty. This gives us a small crack to enter the market," he said.
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The company sells its brand via airports with plans to expand in the top cities by later this year.
Scotch dominates imports
India, one of the world's largest alcohol markets, sells over 400 million cases of Indian alcoholic spirits annually. Yet imported spirits–bottled in origin and bulk bottled in India–account for 2.6 % of the total market. The imported category is dominated by whisky, with Scotch being around 81% of the overall imports of 9.9 million cases of alcoholic spirits, according to estimates by International Spirits and Wines Association of India or ISWAI.
To be sure, 79 % of the Scotch imported into the country is in bulk form, which is used for bottling in India and for blending by local brands of whisky in the IMFL category.
William Grant & Sons, Allied Blenders & Distillers and Bacardi declined to offer comments on the development.
"Customs duty as part of the total MRP is hardly 20%, and if that even comes down by half, the MRP won't change dramatically. It won't immediately and dramatically change prices for everyone," said an industry executive speaking to Mint on the condition of anonymity.
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The person quoted above expects a single-digit percentage drop in prices. Pricing is also dynamic and dependent on how the pound fares next year, freight costs, etc. Meanwhile, the change could take a few months.
Impact on Indian makers
The FTA needs to be ratified by both parliaments, then notified in custom schedules, earliest by January 2026, said a spokesperson for spirits company Radio Khaitan. However, for Indian liquor makers, the duty reduction on bulk Scotch imports provides some advantage.
"We export a lot of IMFL into the Middle East, Africa—for them, there are a lot of big benefits. The move will improve the quality of our IMFL exports," the person quoted earlier told Mint.