Perhaps the fastest Foreign Treaty signed by the Indian government since independence, the Indo- Australian FTA was signed in April this year against all odds of success. It was ratified by the Australian Parliament despite a change in their Federal government, though with slight delay, on 29 November, 2022. It has become operational today, after a 30-day waiting period as mandated by the Treaty.

It will soon result in a graded reduction of the import prices of the $5+ fob Australian wines. But even the sub $5 wines are expected to become cheaper because of the mirrored competition between these two segments. Due to the current glut of wines in Australia, several producers are expected to offer even these sub $5 wines at lower prices.

Also Read : Australia Parliament ratifies Indo Australian FTA (ECTA)

It is interesting that the Indian wine lobby could not sustain the pressure to consent to the duty reduction which they had very successfully managed in the previous negotiations started in 2007 and discontinued when Congress Party ruled the country and they stuck to their correct Stand of the sustenance of the Indian wine industry being in jeopardy with lowering of duties for cheaper wines.

Also Read : Australian Wines to get Cheaper in India with FTA signed Today

The milk lobby in India managed to block any move to make it possible to import milk products from Australia. The dairy industry ensured that all milk and allied dairy products were kept outside the purview of the FTA billed as the India-Australia Economic Co-operation and Trade Agreement (ECTA) in Australia. But the wine industry had resigned to the change in political scenario where the government was keen to sign the Treaty, looking at its potential benefits-with only the first harvest becoming operational today.

The agreement will see a reduction in customs duty on Australian wines in a graded fashion. The current 150 per cent import duty will be reduced to 100 per cent and subsequently to 50 per cent in 10 years for wines costing $5 a bottle. Duty on those costing up to $15 will be reduced to 75 per cent and subsequently to 25 per cent in the same period.

Interestingly, this is perceived to become the de-facto fall in the duties in the structure when the FTA between the European Union and India is signed. The Indian producers hope that this pattern will help increase the wine consumption in India.

Also Read : Australia hopeful of an early FTA with India

Wine is only one aspect of the ECTA. Over 96 per cent of India’s exports to Australia will now get zero duty benefit whereas the reverse holds for only 85 per cent of Australia’s exports to India.

The bilateral trade is expected to double to $45 billion in five years thanks to this Treaty. According to estimates, $23 billion worth of goods will become duty-free from today. Pharma industry ingredients imported from Australia will get cheaper with complete waiver of import duty; this will go a long way to give a boost to the Make in India endeavour promoted by PM Narendra Modi. Travel, study and work rules for students will also be relaxed, opening up new avenues for students wishing to go for further Studies to Australia. With duty waiver, the Garment exports will also see an explosive increase.

Wine export could also see a marginal increase with the withdrawal of import duty in Australia as a niche market-thanks to the Indian diaspora and restaurants there serving Indian cuisine.

Also Read : FTA: Australia- India set Ambitious Target of December 2022

While the Australia deal is the first time India has discussed and agreed on relaxation for wines, it seems it will form the basis for all future negotiations, including the European Union. Reduction in duties on Scotch whisky is a major demand from the UK during the India-UK free trade negotiations, which has already gone past the original Diwali deadline.

Union Commerce Minister Piyush Goyal struck a positive cord today when he said he expects at least two more free trade agreements to be signed up in 2023. Negotiations are scheduled with the UK, European Union and Canada-one hopes that the EU gets to finalise the Agreement with India. “India today works from a position of strength, we negotiate with confidence,” Goyal reportedly said, when he confirmed that the country will sign at least two such free trade agreements.

Wine lovers in India hope and the European producers hope that the FTA with the European Union would be one of the Treaties to take effect in 2023 so that it becomes operational in 2024- 17 years after it was initiated!

Subhash Arora

29 December, 2022