India's decision to exclude bulk Scotch imports from lower tariffs under the India-UK trade agreement has triggered concerns over manufacturing costs, premium whisky prices and future investments in the country's $65 billion alcohol industry.
India's ambitious trade agreement with the United Kingdom has run into a major controversy just three months after its implementation, with leading Indian liquor manufacturers joining multinational companies in challenging the government's interpretation of import duty concessions on Scotch whisky.
The dispute could have significant implications for domestic whisky production, pricing strategies and the growth of India's premium alcoholic beverages market.
The Union Commerce Ministry is expected to hold discussions with senior executives from Indian and multinational liquor companies on Monday, November 2, to address the controversy.
At the centre of the dispute is whether Scotch whisky imported in bulk for blending and bottling in India qualifies for the reduced customs duty introduced under the India-UK free trade agreement (FTA).
The India-UK trade agreement, which came into effect on July 15, 2026, reduced import tariffs on eligible Scotch whisky from 150% to 75%. The duty is scheduled to decline further to 40% over the next decade.
The concession was considered a major breakthrough for British whisky producers, which had long complained about India's exceptionally high import barriers.
However, Indian customs investigators have informed major liquor companies that the reduced tariff does not apply to certain bulk Scotch imports used for manufacturing whisky in India.
The distinction is commercially significant. Approximately 80% of Scotch whisky imported from Britain by volume arrives in bulk rather than as finished bottled products.
Indian companies use imported Scotch in blending operations to manufacture several popular premium whisky brands.
Excluding these imports from the reduced tariff could substantially increase production costs and undermine the benefits companies expected from the trade agreement.
The Confederation of Indian Alcoholic Beverage Companies (CIABC), which represents major domestic manufacturers, has sought urgent government intervention.
In an October 27 letter to the government, the industry association warned that denying tariff concessions to bulk Scotch could make importing finished whisky bottles more attractive than manufacturing products domestically.
Such an outcome could work against India's Make in India initiative, which seeks to encourage domestic production and investment.
CIABC members include Radico Khaitan, known for its 8PM whisky brand, and Allied Blenders and Distillers, the company behind Officer's Choice.
Allied Blenders has identified itself as one of India's largest bulk Scotch importers. The company had expected the trade agreement to improve access to imported Scotch for expanding its premium and luxury whisky portfolio.
The International Spirits & Wines Association of India, which represents multinational companies including Diageo and Pernod Ricard, has also raised concerns about the government's interpretation of the agreement.
All the companies maintain that they comply with applicable laws.
India is the world's largest whisky market by volume, with demand extending from mass-market brands to expensive imported single malts.
Bulk Scotch plays an important role in this market because manufacturers can import whisky in large containers and subsequently blend, bottle, package and distribute products through Indian facilities.
This business model supports domestic manufacturing, packaging operations, supply chains and employment.
Higher import duties on bulk whisky could affect production economics, particularly for companies expanding into premium categories.
The impact on retail prices will depend on individual companies' sourcing arrangements, product positioning and state-level taxes.
Alcohol taxation in India involves both central customs duties on imports and state-level excise duties and other levies. Consequently, a reduction in import tariffs does not automatically translate into an equivalent decline in retail prices.
The controversy represents an important early challenge to the implementation of the India-UK free trade agreement.
Whisky tariffs were among the most contentious issues during negotiations, as India sought to balance access for foreign brands with protection for domestic manufacturers.
The dispute has also attracted diplomatic attention.
Scottish First Minister John Swinney raised concerns over the treatment of bulk Scotch during his October visit to India. The British government has indicated that it is working with Indian authorities to address the issue.
For India's liquor industry, the outcome could influence investment decisions, premium brand expansion and sourcing strategies.
The November 2 meeting will therefore be closely watched by both Indian manufacturers and global spirits companies seeking clarity on how the trade agreement's tariff benefits will be implemented.