The European Union (EU) is scheduled to request formal consultations yesterday with India in the World Trade Organization (WTO) regarding India's import regime for spirits and wines, said the European Commission.

This decision follows an investigation carried out in the framework of the EU's Trade Barriers Regulation at the request of the EU spirits and wines industry.

The investigation concluded that access to the potentially large Indian market for spirits and wines is severely restricted due to a high duty burden and restrictions on retail distribution in certain Indian states, said the commission, the executive body of the EU.
The EU considers that these trade barriers are in clear breach of international trade rules, it said.

After having allowed India a considerable period of time to address the problem, the EU now hopes to use the WTO consultation process to arrive at a mutually satisfactory solution with India, it said.

A request for consultations is the first stage in the WTO dispute settlement process. If the dispute cannot be satisfactorily resolved in consultations, the EU may ask for a WTO Panel to be established to rule on the legality of India's import regime. WTO consultations last for 60 days.

EU spirits and wine producers have for a number of years raised concerns about the excessive duty burden on imports of spirits and wines into India.

The key issue at stake is high additional duties levied on imported spirits and wines.
The additional duties are levied on top of high federal basic customs duties of 150 percent for spirits and 100 percent for wines, raising the cumulative federal duty burden to between 177 percent and 540 percent, said the commission.

Another issue relates to restrictions on the sale of imported spirits and wines in the Indian state of Tamil Nadu, where only Indian-made spirits and wines may be sold through shops and other retail outlets.

According to the industry, the Indian market for spirits is one of the largest in the world amounting to 87 million nine-liter cases. The corresponding figure for wine is 667,000 nine-liter cases.

Moreover, the Indian market holds particular potential for the future. According to Eurostat, EU's statistical service, EU spirits exports to India in 2004 amounted to 23.3 million euros. EU wine exports to India in 2004 amounted to over 4 million euros.