Why imported Scotch whisky is becoming cheaper in India
What's the story
The India-UK Free Trade Agreement (FTA) will come into effect on July 15, and one of its major impacts will be on the price of imported Scotch whisky and gin in India. The FTA proposes a phased reduction in import duties on these beverages. Initially, the import duty would be halved from the current 150% to 75%, and further reduced to 40% by the end of the 10th year.
Price impact
Final retail price will not be equal to import duty-cut
Despite the significant cut in import duty, consumers shouldn't expect an equal percentage drop in prices. Paul P John, Chairman of John Distilleries, explained that import duty is just one component of the final retail price. Other costs such as state excise duties, VAT, distributor and retailer margins as well as logistics and marketing expenses contribute significantly to what consumers ultimately pay.
Savings forecast
Initial benefit of 5-10% expected
John estimated that consumers could see an initial retail benefit of around 5-10%, which could translate into a few hundred rupees per bottle. However, this would depend on the state of residence and the type of Scotch purchased. In high-tax states like Maharashtra, customs duty makes up only 10-15% of the final retail price, thus limiting the impact of lower tariffs.
Tariff impact
Impact varies across different states
In states with relatively lower taxes such as Haryana, prices could fall by up to 15%. However, in states where government corporations control liquor distribution such as Telangana and Andhra Pradesh, the reduction may not immediately reach consumers. This is because state authorities could absorb the duty savings instead of passing them on to consumers.
Beneficiary brands
Bottled-in-origin Scotch whiskies likely to benefit the most
Bottled-in-origin (BIO) Scotch whiskies are likely to benefit the most from this deal. These are fully distilled, aged, labeled, and bottled in Scotland before being imported into India. John said, "Bottled-in-origin imported Scotch will see some impact," but bulk-imported and bottled-in-India Scotch may not see as much of a benefit. He also hinted at more low-end Scotch entrants into India with prices in the Bottled in India range.
Brand impact
Popular Scotch brands that could get cheaper in India soon
Popular Scotch brands like Johnnie Walker Black Label Aged 12 Years Blended Scotch Whisky and Chivas Regal 12 Year Old Blended Scotch Whisky, currently priced at ₹3,888 for a 750ml bottle, could see their prices drop to ₹3,499-₹3,694 after a 5-10% reduction. Similarly, Ballantine's Finest Blended Scotch Whisky (750ml), now costing around ₹2,634 could go down to ₹2,502-₹2,371 in India.