Scotch Duty Cut May Not Substantially Benefit Consumers

Although the prevailing view in the alcoholicbeverage industry is that a cut in import duty on foreign liquor would particularly threaten Indian whiskies in the ₹1,800– 2,000 segment, Prem Dewan, CMD of Devans Modern Breweries Ltd., disagrees, arguing that any adverse impact will be minimal since the portfolio of imported whiskies preferred by Indian consumers is not too large, and thus, there wouldn’t be any reduction in prices by Indian manufacturers.

If at all an example is needed of the impact of cutting Scotch import duty from 150 percent to 75 percent, one need only look at Gurugram, where some of the popular premium blend Scotch whiskies are already cheaper than domestic premium whiskies. Of greater significance would be the removal of discriminatory excise duties that favour imported products as a result of intense lobbying.

Also, contrary to popular opinion and concern that the reduction in duty will directly challenge Indian whiskies in the ₹1,800–2,000 segment, some believe that this will not invite a flood of midpremium Scotch brands into the Indian market.

“This is because only a handful of imported brands are popular in the Indian market. In fact, it is more important for the state governments to provide a level playing field to the domestic manufacturers to enable them to compete with the imported brands on an even keel,” opines Prem. That said, the cost of imported bulk Scotch would become cheaper for Indian companies, though some like Prem do not envisage any reduction in prices by Indian manufacturers. “The Indian liquor market is very competitive and any money saved is welcome in order to fight the competition,” he says.

The Devans Strategy

Given the effects that the reduction in import duty may cause, Devans Modern Breweries is not planning of dropping the prices of its single malts to counter any expected drop in the prices of imported brands. The company has positioned its single malts in the premium category and does not feel the necessity of imposing any cuts in the prices. Its expressions have already topped international competitions this year, validating the quality of the brands.

Retail Impact of Duty Cuts

Though liquor pricing in India is largely dictated by states’ excise policies, such as recent duty hikes on IMFL in Maharashtra and Karnataka, which has already reduced the price difference between Indian and imported brands, there is a view that there would not be any substantial reduction in retail prices of imported brands. “There may S be some reduction but that would not be of much significance,” Prem states. He also notes that global markets are undergoing significant upheaval at the moment because of the so-called “Donald Trump effect”, and nobody knows what to expect tomorrow.

Meanwhile, trade groups have proposed safeguards like a minimum import price (MIP) on bottled Scotch imports to protect domestic producers, though it remains unclear whether such regulatory interventions can be sustained in the long term. According to Prem, regulatory oversight is necessary to ensure there is no under-invoicing in the import of liquor products, which would go against the interests of the domestic manufacturers. Underinvoicing is commonly observed in the import of materials, especially when companies export to their own branches in India.