Things have now come to a head where India may not permit access at concessional duty rates to foreign whiskies, including Scotch in any free trade deal unless potential partners reciprocate by allowing sale of Indian products as whiskies in their markets instead of branding them as spirit, two officials said.

The issue is one of several contentious ones in ongoing negotiations for at least two free trade agreements (FTAs), one with the United Kingdom (UK) and the other with the European Union (EU), they added, requesting anonymity.

While European countries insist that an alcoholic beverage must be matured for a minimum three-year period to be qualified as a whisky, Indian standards require a 12 to 18-month maturation only, because of the relatively warm climatic condition in India, one of the officials explained.

“The name by which an alcoholic beverage is recognised is now on our radar and has become part of our discussions in all FTAs ,” a second official added.

According to the first official, while high-end Indian-made whiskies (including some award-winning single malts) are sold in the UK under the tag of Indian single malt whisky, the problem arises for the more popular whiskies. “These high-end products are anyway matured for more than the specified time. But they are very costly and cater to top-end of the market. Real problem lies for our regular whisky brands,” an industry expert said requesting anonymity.

“European countries are resorting to a non-tariff barriers (NTBs) under the garb of the maturation period condition. If we follow their norm, our products will be unviable as a three-year maturation would mean loss of about a 30% due to evaporation because of the climatic conditions,” he said.

Companies in these countries “fear that low-priced Indian products will swarm their market. While we are willing to call it Indian whisky, they insist on labelling it as a spirit, which would give an impression that it is some kind of cleaning agent,” this person explained.

Confederation of Indian Alcoholic Beverage Companies (CIABC) Director General Vinod Giri said, “The UK wants India to reduce tariffs on scotch whisky to further increase its market share in the vast Indian whisky market, world’s largest and also the largest export market for Scotch whisky by volume. But it is not willing to reciprocate in the same proportion to allow Indian whiskies into the UK market.”

India currently exports barely 10,000 cases of whisky to UK out of its total overseas shipments of over 9 million cases. India levies up to 150% import duty on imported alcoholic beverages.

UK says that a spirit cannot be called whisky if it is not matured for minimum three years in wooden casks. But the speed of maturation for alcoholic beverages is not same across geographies. It depends upon a series of factors, most notably, the ambient temperature, relative humidity and quality of the cask, Giri added.

“In warmer and drier climate, the maturation takes place faster. In warm climate like India’s, whisky matures at a 3-5 times faster rate compared to a cold and humid climate like Scotland,” Giri said.

“This also reflects in the cost of the product. When whisky is being matured in a porous wood cask, a part of it is lost over time due to evaporation. This is called ‘Angel’s share’. In cold and humid climate such as Scotland, evaporation losses are 1-2% year on year. In a warm climate like India, the evaporation losses are 10-15% a year , which increases the cost of production proportionally.”

CIABC believes that for the FTA to benefit both sides, the condition of maturation should be removed so that Indian whiskies can be exported to UK. “UK is not a large whisky market, way smaller than India, but the matter is of parity in principle and of mutual gain which is an essential goal of an FTA,” Giri said.