Indian Wining Habits Sobered By High Tariffs

Amelia Gentleman

One of the more enduring legacies of the British Raj in India has been the elite's affection for a stiff glass of whiskey at the end of the day.

Domestically produced malts and scotches still account for at least 60 percent of all alcohol consumed across the nation. But a revolution in drinking habits is under way, as the country's huge, emerging middle class acquires a taste for wine.

Wine sales are growing in India at about 30 percent annually, and a younger generation of newly cosmopolitan Indians are eschewing the evening peg of whiskey in favor of something a little lighter.

"It is a generational thing. People are becoming more health conscious; red wine is seen to be more healthy than whiskey soda. And there's an aspirational element as well: people are more exposed now to Western styles, they travel to London and New York and don't see so much whiskey being drunk there," Rajeev Samant, founder of Sula, one of the most popular wineries in India, said.

"There's an idea that drinking a glass of wine puts you in a different, more sophisticated category."

For European and U.S. wine producers, this rapidly expanding market represents a highly desirable and yet frustratingly inaccessible sphere. Taxes imposed on imported wine have made French and Californian labels unaffordable to all but India's superrich, transforming the most unremarkable €3 vin de table into a wild, and inevitably disappointing, extravagance, costing the rupee equivalent of €15.

Last week the United States followed the EU and filed a formal complaint against India with the World Trade Organization over the complex array of tariffs imposed on wine, which can increase the price of a bottle by up to 550 percent.

Although India consumed just 7.8 million bottles last year, the speed with which wine is becoming popular has attracted huge interest internationally.

"We expect that in the next 15 years, India will become one of the largest consumer markets in the world," a U.S. Embassy official, who asked not to be named because of negotiations on alcohol tariffs, said. "From the standpoint of our wine producers in the U.S., the potential is huge. We need to try to resolve this now."

The total value of U.S. wine exports to India now stands at $1 million, which in a country with 1.1 billion people is "almost negligible," the official added. In a speech earlier this month, the U.S. ambassador, David Mulford, lamented the wine-tax dispute, at a time when U.S.-Indian relations are improving in most other spheres.

If consumption of foreign-made wine remains restricted, Indian vineyards, which barely existed a decade ago, are increasing production fast. Making wine from grapes grown in vineyards in Nasik, a few hundred kilometers north of Mumbai, Sula sold 60,000 bottles when it opened in 2000 and this year expects to sell 1.5 million bottles, an increase of 50 percent over last year.

The high import duties are partly in place to protect this burgeoning Indian wine market, which has begun to be noticed by wine experts around the globe.

But Samant of Sula was confident that his business would survive a reduction in protectionist tariffs.

"Women have started drinking, too, and that's expanding the market," Samant said.

"You can see them drinking wine in films; you see them holding a glass of wine in society parties in magazine pictures," he said. "That would have been unthinkable even seven years ago. So much has changed here in a very short period of time."

Aman Dhall, executive director of Brindco, India's largest importer of wines, said for men, too, there had been a radical shift in culture.

"Earlier India was a very macho society, and drinking whiskey was seen as cool. But tastes are changing; people want to drink something with their food rather than something to make them drunk," he said.

But wine enthusiasts still face a struggle in India. Delhi has no wine bars and no wine shops. Wine is usually sold in state-controlled liquor stores that are usually ill-fitted for storing bottles in the searing summer heat; few stock imported labels. Instead, every regular party-thrower in the capital seems to have a telephone number for a bootlegger who can supply foreign wine at a premium — with no questions asked.

"If you want to buy French wine, it's almost impossible in Delhi," said the food critic and newspaper columnist Vir Sanghvi. "The shops that do stock it, store it badly, and it will often be spoilt."

Wine drinkers also have to contend with India's ambivalent attitude toward consumption of alcohol. Annually, the Delhi region has 21 dry days — marking everything from Gandhi's birthday to Independence Day — when all alcohol sales are suspended.

The chief minister of Delhi, Sheila Dikshit, periodically places advertisements in the papers reminding readers of Gandhi's slogan: "Drinking is a crime to yourself. Stop it."

And even Indian-produced wines remain expensive — the cheapest brands start at 300 rupees, or almost $7, a bottle. In terms of what the industry calls "kick per buck," whiskey remains a better choice, for all but the richest.

Reva Singh, editor of Sommelier India, India's first wine magazine, (which aims to demystify the wine drinking experience for new consumers) said that given these obstacles, "it says something for the market that people are still drinking wine and that sales are going up by leaps and bounds."

Both EU and U.S. representatives say they hope that the dispute over tariff levels can be resolved without embarking on a formal WTO dispute settlement.

For Kamal Nath, India's commerce minister, it all goes back to whiskey again.

If India were to reduce wine import taxes, he said, there should be some payback for India. He proposed that Europe should in turn open its markets to Indian-made whiskey — which the EU currently refuses to recognize as genuine whiskey because it is made from molasses and not cereal.

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