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UK wants to say Cheers with Scotch despite tariffs

In a recent visit to India, UK Ex-Prime Minister Boris Johnson decided to push for a Free Trade Agreement. The idea was to have fewer trade barriers between the two countries. In other words, an agreement that would help both countries ship products and services without excessive taxes.

For the UK Scotch whisky is the elixir perhaps because of Brexit. UK voted to leave the European Union and perhaps what went unnoticed was third of the country’s whisky exports - £1.3 billion ($1.65 billion) worth actually, went to EU countries. Post-Brexit however, that isn’t the case. The move has cost the scotch whiskey industry £5 million ($6.3 million) every week. And now they’re being forced to work with every EU country independently. They have to deal with different shipping norms, separate customs requirements and a whole host of packaging regulations.

It turns out that all these issues have prompted the UK to think differently and find newer markets. First, they targetted Australia and struck a deal — to remove a 5% tariff on scotch whisky. Elsewhere the UK managed to obtain the coveted “protected status” for its whisky by inking separate deals with Japan, Norway, Iceland and Liechtenstein. This will protect their scotch whisky from imitation, misuse, or any other forms of intellectual abuse.

And the focus shifted to India, a country that consumes more whiskey than any other country in the world. One in every two bottles of whiskey is now sold in India and the UK wants to make up for the loss in sales in the European Union by growing its market in India.

The UK allows ALL imports of Alcoholic Beverages into the country to be taxed to NIL customs duty and this is not just from India, it’s from 70+ other countries, that supply AlcoBev to the UK. Similarly, the conditions about a minimum three-year maturity, type of substrate used, the absence of additives, etc. are all equally applicable to Whiskies from all supplying countries, including the UK. So, there are no India-specific barriers that some players are seeking removal of. On the other hand, India imposes customs duty of 150% on all imports of Alcoholic Spirits, from all countries including the UK (which has the largest share of such imports), says I P Suresh Menon, Secretary General, ISWAI (International Spirits and Wine Association of India).

But the whiskey definitely dominates the Indian market, almost contributing 60% of sales to the IMFL (Indian Made Foreign Liquor) segment. But if you’re a person who enjoys a glass every now and then, you’d know there’s a difference between Indian whiskey and Scotch whisky.

Scotch whiskey is typically of Scottish origin and made from grains - primarily barley. On the other hand, IMFL is made from molasses, a by-product of sugar production and grains. It is much cheaper. So in some ways, IMFL liquor outsells its foreign counterpart in a massive way. But there’s another roadblock for foreign manufacturers - Taxes! See, taxing liquor is a wonderful source of revenue for the Indian government. For instance, five southern states namely Andhra Pradesh, Telangana, Tamil Nadu, Karnataka, and Kerala generate 10% of their revenues from taxes on liquor sales alone. And you can see why they want to impose even higher taxes on imported liquor. In fact, import duties can go as high as 150% in some cases. And that means, even though Scotch Whisky imports in the country have risen 200% in the past decade, it still only commands a tiny 2% market share in the Indian markets.

Now imagine if the tariffs were removed completely. What would that mean for the UK and Scotch Whisky industry. Well market sources contend that the market share could reach as high as 6%.

And so you can see why this makes total sense for whiskey manufacturers in the UK. But do Indians benefit in any way?

Well, for starters Scotch Whisky will likely become more affordable and more Indian whisky producers will use more Scotch in their IMFL and will premiumise their brands to an extent that the difference between Scotch and IMFL would not be much different. So it will mean that Indian consumers will get a product as good as Scotch at a favourable price. But cutting importing duties could also bump up revenues for the government. For instance, last year, the Maharashtra government slashed excise duty by 50% on imported liquor. And it now expects revenue to rise by ₹150 crores — from the sale of imported scotch annually.

And finally, with over 19 million new consumers coming of “legal drinking age” each year, India is definitely a market that liquor makers would like to tap into. Guess it will be a win-win situation for consumers. The Indian government may be tempted to go ahead with deal as the possibility of revenues rising in a sustainable manner is a good possibility.

According to Director General of the Confederation of Indian Alcoholic Beverage Companies (CIABC apex body for domestic liquor firms), Vinod Giri, this FTA also holds significant importance for India in the scope of future trade with the United Kingdom as trade competitors like Bangladesh, Sri Lanka, and Pakistan enjoy duty-free merits under the UK’s generalised scheme of preferences. Indian liquor producers are keen to enjoy newer markets for their products in the United Kingdom but are hindered by the stipulation that whiskey exported to the Brits should be Grain based and aged for three years. At the same time, liquor produced in India is not aged.

Refined Oil (9.7% of all UK goods imported from India)
Clothing (9.6%)
Medical and pharmaceutical Products (5.6 %)
Miscellaneous Metal Manufactures (5.1%)
Textile Fabrics (5.0%)

All these products were the primary imports to India from the United Kingdom, but as the pact stands on the brink of either collapse or being executed after several reconsiderations. A recent list had brought forward 240 odd items which would face trade duty deductions once the agreement is executed. From this pool of 240 things, a few that stand out are whisky, cars, vaccines, basmati rice, wool, and tea premix. As of now, no indication has been released about the possible way out of the situation, but in the coming future, it’s possible that the pact might be passed with several reconsiderations and follow-up procedures. Currently, diplomatic negotiations of the highest level are going on between the countries.

Amid reports of the UK seeking massive tariff concessions on imports of scotch whiskey during ongoing free trade agreement (FTA) negotiations, liquor sector association Confederation of Indian Alcoholic Beverage Companies (CIABC) has written to the government strongly objecting to any plans to slash Basic Customs Duty (BCD).

A reduction in BCD, it said, will adversely affect Indian Made Foreign Liquor (IMFL) brands since imports already dominate the Indian alcoholic beverages market. CIABC has been part of several recent meetings hosted by the Ministry of Commerce with stakeholders before the trade talks with the UK.

“India exports just ₹5 crore worth of alcoholic beverages annually to the UK against an import of ₹1,300 crores. Exports to the UK constitute only 0.2% of India’s total exports of alcoholic beverages whereas imports from the UK are 24% of India’s total import of alcoholic beverages,” said Vinod Giri, DG, CIABC.

Giri further noted that “restrictive” trade policies are also hampering the growth of Indian exports. “While the export of alcoholic beverages from India stood at 7.3 million cases (9 litre each) in the year 2019-20, exports to the entire EU (including the UK) were less than 30,000 cases which consisted of Indian super premium malt whiskies,” he pointed out.

CIABC said that the United Kingdom should also remove restrictions such as a minimum three years’ maturation period for whiskey and rum, since it has been scientifically established that in warm Indian conditions, spirit ages 3-3.5 times faster than in the UK. Giri added that a BCD cut would skew the balance of trade.

A notion worth dispelling is that Scotch whiskies are costlier to produce; it is 50% more expensive to produce it in India than in Scotland.

In wake of the Indo-UK trade discussions, many ‘experts’ argue for reduction in tariff, particularly slashing custom tariffs on imported Scotch and on ‘Intermediate’ products which they say are nothing but high-strength, potable, undenatured ethyl alcohol used for bottling and blending in India.

They argue on three main grounds. One, that India has a large trade surplus in the category and can afford greater imports; two, customs duty reduction on intermediate products will encourage ‘Make in India’; and three, even if tariff is reduced the bulk of consumption will remain locally produced whiskies — so why bother.

This industry contributes nearly ₹250,000 crore in taxes and for most states it constitutes 15-30% of revenue. Customs duty is not even ₹5000 crore in comparison. Second, this industry uses agricultural products as primary raw material and nearly 50 lakh farmers depend on it. It provides employment to 20 lakh people. Any disruption will have widespread ramifications for the government, farmers and labour market.

The problem with the first argument is that it hides the true balance of trade on alcoholic beverages using a wider head of ‘Food and Drinks’. If one separates alcoholic beverages/products for human consumption from the wider clubbing of ‘Food and Drinks’, a very different picture emerges.

As per DGFT data for 2018-19, India exports only ₹5 crore worth of alcoholic products/beverages to the UK, against import of ₹1300 crore. Clubbing alcohol under a much bigger ‘Food & Drink’ category to claim favourable balance of trade is highly misleading.

The second argument is also a misconception. Scotch Whisky goes through two major stages of productions — distillation and bottling. The ‘Intermediate’ Scotch whisky is actually the output of the first stage, it has been produced and matured in Scotland. What happens in India is only bottling. Therefore, while incentivising intermediate products through reduced or zero duty will lead to an increase of usage of bottling plants in India, which will be a big loss for Indian farmers and manufacturers.

The third argument misses out on three vital points. One, in product categories with multiple price segments like whisky, consumers seamlessly shift to the next category up or down depending on affordability.

So, when a Scotch whisky is sold at a lower price it takes away consumers from products in the price segment, starting a domino effect that makes the domestic industry the net loser. Two, introduction of Scotch whisky at lower price attacks the profit driving end of portfolio of Indian companies, thus jeopardising their viability. Third, Indian premium whiskies like Amrut, Paul John or Rampur are now regarded amongst the best in the world but are unable to make the same headway in the domestic market due to an unsupportive regime and reducing customs duty further just will not help.

Another notion worth dispelling is that Scotch whiskies are costlier to produce. Rather, it costs at least 50% more to produce a whisky of similar quality in India than in Scotland. This is primarily on account of a higher cost of capital and higher taxes in India, interstate restrictions and higher evaporation losses.

Also, many states offer concessionary taxes on imported products, but reduction in customs tariffs cannot be done without removing compensatory state-based concessions as otherwise it will create a hugely discriminatory tax regime against Indian products.

If we talk about reciprocal duty concessions, the problem is that barriers put up by the UK are not tariff based but non-tariff ones. India, being a sugar producing country, has evolved whisky recipes based on spirit distilled from molasses. The UK does not accept this as it is not “recipe standards”. The result of these non-tariff barriers is that of the 70 lakh cases of whisky exported from India every year, the whole of the EU including the UK accounts for less than 30,000!

Indian industry is not against reducing customs duty on alcohol, but it should be in a phased manner and up to a point where it creates a level playing field.

Accordingly, it has put forward its recommendation to reduce import taxes, aggregate of customs duty and AIDC, from 150% to 100% now and to 75% in five years’ time. It has also recommended a threshold import price for taxation at $5 per bottle, and reciprocal concessions from the UK allowing whiskies from India to be allowed in the UK market as ‘Indian Whisky’ without minimum maturity conditions.

India and Australia sign an interim trade deal

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The India-Australia Economic Cooperation and Trade Agreement (“IndAus ECTA”) was signed by Shri Piyush Goyal, Union Minister of Commerce and Industry, Consumer Affairs, Food and Public Distribution and Textiles, Government of India and Mr. Dan Tehan, the Minister for Trade, Tourism and Investment, Government of Australia in a virtual ceremony, in the presence of Prime Minister of India, Shri. Narendra Modi and the Prime Minister of Australia, Mr. Scott Morrison recently.
In his opening remarks during the Joint Press Conference with Mr. Dan Tehan after the signing in ceremony, Shri Goyal said the Australia – India ECTA truly symbolises our Ekta (Unity) & the spirit of cooperation. Terming it a historic day for India, as it is the 1st agreement with a developed country after a decade, Shri Goyal said our relationship rests on the pillars of trust & reliability, aptly reflected in our deepening geostrategic engagement through the Quad & Supply Chain Resilience Initiative.

Stating that India and Australia are natural partners, connected by shared values of democracy, rule of law & transparency apart from our shared love for Cricket, Food & Movies, Shri Goyal said Ind-Aus ECTA is expected to almost double bilateral trade to about $50 billion in five years. He said there is great potential for Indian exports in sectors like textiles & apparel, leather, hospitality, gems & jewelry, engineering goods & pharma, IT, Startups etc. Australia has committed to key areas of India’s interest in Services like Education, IT, Business, Professional Services, and Health & Audio-visual while Australia will also provide Post-study work visas for students, the quota for Chefs & Yoga instructors, and Work & Holiday visas for young professionals.

Tariffs will be eliminated on more than 85% of Australian goods exports to India (valued at more than $12.6 billion a year), rising to almost 91% (valued at $13.4 billion) over 10 years.

Australian households and businesses will also benefit, with 96% of Indian goods imports entering Australia duty-free on entry into force.

India is the world’s largest democracy and the world’s fastest-growing major economy, with GDP projected to grow at 9% in 2021-22 and 2022-23 and 7.1% in 2023-24.

Shri Goyal said the Agreement provides adequate safeguards to prevent circumvention, fuse to protect against sudden surge in import of goods; for the 1st time, mechanism included for compulsory review after 15 years. Underlining that the Ind-Aus ECTA will not only herald a new era of trade & commercial ties, but also take the relationship between our nations to greater heights. Shri Goyal said he will be visiting Australia in the coming days, to take the ECTA to people.

Like true brothers, both nations supported each other during Covid-19. Ind-Aus ECTA covers the entire gamut of the trade & commercial relations, removing trade barriers & opening a plethora of opportunities in both goods & services. Expected that with ECTA, the present bilateral trade for merchandise & services of $27.5 bn (2021), may reach a level of about $45 to $50 billion in the next five years.

It is expected to create new employment opportunities, raise living standards and enhance the overall welfare of the peoples of both the countries. Additional employment generation is expected to be 10 lakhs within the next five years.
Australian wine exporters, however, will have to wait for the full benefits, with tariffs on wine bottles with a minimum import price of US$15 expected to reduce from 150% to 75% when the agreement enters into force. This tariff will then reduce to 25% over 10 years.

Tariffs on wine with a minimum import price of $5 per bottle will be reduced from 150% to 100% on entry into force and subsequently to 50% over 10 years.

In services, Australia has offered 135 sub-sectors to India, while India offered 103 sub-sectors to Australia. Adequate safeguards have been provided to prevent circumvention or diversion of goods from any non-party. Provision for bilateral safeguard measures to protect against a sudden surge in import of goods. For the 1st time, a clause is introduced for a special review mechanism that provides for compulsory review after 15 years in a time-bound manner.

“The IndAus ECTA, encompassing trade in goods and services, is a balanced and equitable trade agreement, which will further cement the already deep, close and strategic relations between the two countries and will significantly enhance the bilateral trade in goods and services, create new employment opportunities, raise living standards and improve the general welfare of the peoples of the two countries,” the commerce ministry said recently in a press release.

In 2020, India was Australia’s seventh-largest trading partner, with two-way trade valued at $24.3 billion, and sixth largest goods and services export market, valued at $16.9 billion. Our Government’s goal is to lift India into our top three export markets by 2035, and to make India the third largest destination in Asia for outward Australian investment.

The Australia-India Economic Cooperation and Trade Agreement (AI ECTA) signed recently will further strengthen that relationship.

Prime Minister Scott Morrison said the agreement would create enormous trade diversification opportunities for Australian producers and service providers bound for India, valued at up to $14.8 billion each year.

“This agreement opens a big door into the world’s fastest growing major economy for Australian farmers, manufacturers, producers and so many more,” the Prime Minister said.

“By unlocking the huge market of around 1.4 billion consumers in India, we are strengthening the economy and growing jobs right here at home.

“This is great news for lobster fishers in Tasmania, wine producers in South Australia, macadamia farmers in Queensland, critical minerals miners in Western Australia, lamb farmers from New South Wales, wool producers from Victoria and metallic ore producers from the Northern Territory.

Benefits of AI ECTA include:

Sheep meat tariffs of 30% will be eliminated on entry into force, providing a boost for Australian exports that already command nearly 20% of India’s market.

Wool will have the current 2.5% tariffs eliminated on entry into force, supporting Australia’s second-largest market for wool products.

Tariffs on wine with a minimum import price of US$5 per bottle will be reduced from 150% to 100% on entry into force and subsequently to 50% over 10 years (based on Indian wholesale price index for wine).

Tariffs on wine bottles with minimum import price of US$15 will be reduced from 150% to 75% on entry into force and subsequently to 25% over 10 years (based on Indian wholesale price index for wine).

Tariffs up to 30% on avocados, onions, broad, kidney and adzuki beans, cherries, shelled pistachios, macadamias, cashews in-shell, blueberries, raspberries, blackberries, currants will be eliminated over seven years.

Tariffs on almonds, lentils, oranges, mandarins, pears, apricots and strawberries will be reduced, improving opportunities for Australia’s horticulture industry to supply India’s growing food demand.

The resources sector will benefit from the elimination of tariffs on entry into force for coal, alumina, metallic ores, including manganese, copper and nickel; and critical minerals including titanium and zirconium.

LNG tariffs will be bound at 0% at entry into force.

Tariffs on pharmaceutical products and certain medical devices will be eliminated over five and seven years.

Minister for Trade, Tourism and Investment Dan Tehan said AI ECTA would also further strengthen the people-to-people links between our countries. India was Australia’s third largest market for services exports in 2020.

“This agreement will turbocharge our close, long-standing and highly complementary economic relationship in areas such as critical minerals, professional services, education and tourism,” Mr Tehan said.

“It will create new opportunities for jobs and businesses in both countries, while laying the foundations for a full free trade agreement.”

Both countries will facilitate the recognition of professional qualifications, licensing, and registration procedures between professional services bodies in both countries.

Australian services suppliers in 31 sectors and sub-sectors will be guaranteed to receive the best treatment accorded by India to any future free trade agreement partner, including in: higher education and adult education; business services (tax, medical and dental, architectural and urban planning; research and development; communication, construction and engineering; insurance and banking; hospital; audio-visual; and tourism and travel.

Australia will also provide new access for young Indians to participate in working holidays in Australia. Places in Australia’s Work and Holiday programme will be set at 1,000 per year and Australia will have two years to implement the outcome. This is expected to contribute to both workforce requirements and to boost tourism to support our post-Covid recovery.

In a boost to our STEM and IT workforces, the length of stay for an Indian Student with a bachelor’s degree with first class honours will be extended from two to three years post study in Science, Technology, Engineering or Mathematics (STEM) and information and communications technology (ICT) sectors.

Australia and India have also agreed to undertake cooperation to promote agricultural trade as part of the agreement and will now work toward concluding an enhanced agricultural Memorandum of Understanding (MoU).

Mr Tehan signed AI ECTA on behalf of Australia during a virtual ceremony with India’s Minister of Commerce & Industry, Consumer Affairs & Food & Public Distribution and Textiles, Piyush Goyal, attended by Prime Ministers Scott Morrison and Narendra Modi.

This announcement builds on the Morrison Government’s $280 million investment to further grow economic relationship and support jobs and businesses in both countries, that includes:

$35.7 million to support cooperation on research, production and commercialisation of clean technologies, critical minerals and energy;

$25.2 million to deepen space cooperation with India and $28.1 million to launch a Centre for Australia-India Relations.

AI ECTA is an interim agreement and both countries continue to work towards a full Comprehensive Economic Cooperation Agreement.

Himachal Pradesh new liquor policy aims to boost revenues, while curbing illicit trade

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The Chief Minister Jai Ram Thakur, under whose chairmanship, the Cabinet met announced that the government intended to collect Rs. 2,131 crore revenue from state excise. This would be a jump of nearly Rs. 264 crore and a 14% jump in excise revenues over the previous financial year.

The policy includes renewal of retail excise vends for the financial year 2022-23 at the renewal fees of 4% of the value of unit/vend. The objective is to gain adequate enhancement in government revenue and curb the smuggling of country liquor from the neighbouring states by a reduction in its price.

Annually, Himachal Pradesh earns Rs. 1,800 to 1,900 crore from excise, which includes the sale and consumption of foreign liquor brands and country liquor sold in open markets, vends, bars and restaurants. Excise is one of the biggest source after the sale of power, mining (minerals) and tourism in the hill state.

Country Liquor prices reduced

The brands of Country Liquor will be cheaper as license fees has been reduced. This will help in providing good quality liquor at a cheaper rate to the consumers and they won’t be tempted towards purchase of illicit liquor and evasion of duty will also be checked. In new excise policy, the 15% fixed quota of country liquor for manufacturers and bottlers to be supplied to the retail licensees has been abolished. This step will give the retail licensees to lift their quota from the suppliers of their choice and further assure supply of good quality country liquor at competitive prices. The MRP of country liquor will be cheaper by 16% of existing price.

The fixed annual license fee of bars has been rationalised by abolishing the area specific slabs of license fee. Now throughout the State there will be uniform license slabs based upon the room capacity in hotels.

Fixed license fee of bars in tribal areas reduced

As Himachal Pradesh is known for its tourism, the government intends to provide better facility to the tourists visiting tribal areas and also provide relief to the hotel entrepreneurs, the rates of annual fixed license fee of bars in the tribal areas.

To keep a check on illicit trade and to monitor the manufacturing, operations of liquor, its dispatch to wholesalers and subsequent sale to retailers, it has been made mandatory for all the above stakeholders to install CCTV cameras at their establishments. The government also has imposed stringent penalties to ensure that irregularities detected by the department in liquor bottling plants, wholesale vends and retail vends are curbed. An effective end to end online Excise Administration System shall be setup in the State which shall include the facility of track and trace of liquor bottles besides other modules for real time monitoring.

As per the policy the Renewal fee (non-refundable) for each vend/unit shall be paid @ 4% of the value of vend/unit (MVV) for 2022-23 while filing application for renewal. b) Renewal Fee of Country Fermented Liquor (Lugdi/Jhol) Vends Sr. No. Value of vend Renewal Fee (i) Upto Rs. 1.00 Lakh Rs. 20,000 (ii) Above Rs. 1.00 Lakh upto Rs. 10 Lakh Rs. 25,000 (iii) Above Rs. 10.00 Lakh Rs. 30,000.

The policy said that the Zonal Collectors/District Incharges shall not be allowed to proceed with the conditional renewal of any vends/units. Sub-vends shall be granted to a retail licensee within the State subject to payment of annual license fee of Rs. 8,00,000 or 10% of the vend value whichever is lower subject to the minimum of Rs. 4,00,000. Whereas, keeping in view the issue of smuggling of liquor into the State, the sub-vends shall be granted within a distance of 100 meter from the State border on the payment of annual license fee of Rs. 3,00,000. The sub-vends shall be approved and
granted by the Collector of the Zone concerned.

Fixed License Fee

The fixed license fee on annual basis (including renewal fee) for various Licenses of Foreign Liquor, Country Liquor and Beer per license for the year 2022-23 have been changed.

Type of license Fixed license fee per annum

L-1 (Wholesale vend of IMFS/Foreign liquor/Beer/Wine)	Minimum license fee of ₹20,00,000/- for lifting upto 3.00 lakh proof litres. Beyond 3.00 lakh proof litres an additional ₹3.00 per proof litre
L-1A (Storage of Foreign Liquor in Bond)	₹2,00,000/- excluding such other fee as may be prescribed
L-1B (i) Wholesale vend of Foreign Liquor to L-1 vend only	₹4.25 per P. L. on Foreign Spirit and ₹1.50 per B.L. of RTD Beverages subject to minimum of ₹4,00,000/-
Exclusively for Beer	₹1.50 per B.L. subject to minimum of ₹4,00,000/-.
L-1BB (wholesale vend of imported foreign liquor) from outside India to L-1 & L-2 as well as to the Club and Bar license holders.	Annual fixed license fee ₹5,50,000/-
L-1BIO (License for space holder in Custom Bonded Warehouse for wholesale of imported BIO brands to L1BB)	Annual fixed license fee ₹10,50,000/-
L-1C (Wholesale vend of foreign liquor by distiller or bottler only).	₹6,00,000/-
L-1E for export of IMFS for non-manufacturer wholesale licensee for interState sale	₹3.00 per proof litre subject to minimum of Rs. 10.75 lakh per annum.

Marrying ethanol with petrol the need of the hour

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In an interview with Ambrosia, V.N. Raina, Director General, AIDA, stresses on the need to blend 10% of ethanol with Petrol to save valuable foreign exchange for the country.

What is the current situation of ethanol production in India?

The production of ethanol for mixing with petrol was introduced in the country during the year 2006-07. Ethanol is an important bio-fuel and is blended with petrol under EBP programme. It is an important component of national bio fuels programme. Ethanol is a source of energy which is indigenous, non polluting and virtually inexhaustible.Therefore to promote this bio fuel, the govt. has scaled up the blending targets which are given below:-

Production of Surplus grains declared (2018-19)

S.No. Products Qty ( Lac Tonnes)

1 Maize 30-40

2 Bajra 9.00

3 Jawar 4.70

The initial aim was to mix 5% ethanol with petrol by the season 2016-17. However, to promote bio fuel the govt. scaled up the blending targets from 5% to 10% to be achieved by the season 2021-22 under Ethanol Blended with Petrol Programme (EBP). However, due to various reasons implementation of this programme was not seriously taken up till the year 2017 when the govt. notified the programme. But with all the efforts of the govt. and the distillery industry producing ethanol from molasses 5% blending could not be achieved even till the year 2016-17, However, during the current year 2018-19 (closing 30th Nov. 2018) total blending of approx. 6.2% has already been achieved. This also included the ethanol produced from grains “not fit for human consumption” to supplement the ethanol supplies.

The entire ethanol game plan envisaged by the govt. Can be explained in nutshell as below:

Centre has set a target of 10% ethanol blending by petrol by 2022, leading to forex savings of `12,000 crores a year.

There was 3.5% blending in 2016-17 sugar season and 4.0% in 2015-16.

Nationwide average for ethanol blending stood at 4.02% as on Oct.1

The latest proposal will allow ethanol production from surplus quantities of maize, jawar and bajra, as well as other feedstock such as fruit and vegetable wastes.

Ethanol blending in petrol has risen from 38 crore litres in supply year 2013-14 to an estimated 146 crore litres in 2017-18.

What are the incentives being given by the government to ramp up the production given the increasing ethanol requirements in India?

The Govt. first introduced financial assistance scheme by extending financial assistance through spot loans to sugar mill attached distilleries to set up plant and machinery for production and enhancement of ethanol production capacities in the country. Many distilleries attached to sugar mills applied for and received the financial assistance form the Ministry of Consumer Affairs, Food & Distribution, GOI enabling them to put up distilleries and ethanol production equipment. The financial scheme included facility of interest subvention @ 6% per annum or 50% of rate of interest charged by banks, whichever is lower with certain conditions.

In order to augment ethanol production capacity and thereby also allow diversion of sugar for production of ethanol, in principal approval has been granted for extension of soft loan of `6139 crores though banks to the mills for setting up new distilleries /expansion of existing distilleries and installation of incineration boilers or installation of any method as approved by Central Pollution Control Board for Zero Liquid Discharge for which Government will bear interest subvention of `1332 crore. About 114 sugar mills are likely to be benefitted as a result of this measure and ethanol production capacity of sugar mills in the country is likely to be enhanced by about 200 crore litres per annum in the coming three years.

The Govt. has notified a new scheme on 08.03.2019 for extending financial assistance to sugar mills for enhancement and augmentation of ethanol production capacity. Under the scheme Govt. would bear `2,790 core towards interest subvention for extending indicative loan amount of `12,900 crore by banks to the sugar mills for augmentation of ethanol producing capacity.

The Govt. has notified a scheme on 08.03.2019 for extending financial assistance to molasses based stand-alone distilleries. Under the scheme, Govt. would bear `565 cores towards interest subvention for extending indicative loan amount of `2600 crore by banks to the molasses based stand-alone distilleries to augment their ethanol production capacity.

On further request from distillery industry and All India Distillers’ Association (AIDA), govt. has also agreed to consider financial assistance on the same condition to grain based distilleries for producing ethanol. Many distilleries have already applied. In the meantime loans have been sanctioned as far as molasses based distilleries are concerned. The scheme for loans to grain based distilleries is also under consideration of the govt. This step will provide further possible resources towards increasing the production of ethanol under EBP Programme.

What are the current requirements of ethanol and are there any deficit and how are they bridging it?

The current requirement as per the programme of introducing 10% blending by the year 2022 requires approximately 300 crore ltrs. of ethanol. The govt. has announced various incentives and financial assistance to the industry. It is hoped by the closing of the year 2019-20 when new distilleries would have gone up including increase in existing production capacities in the existing units due to the positive steps taken by the govt., the 10% blending will be achieved by the year 2020- 21/22.

The prices announced for Ethanol for supply year 2019-20 (1st Dec. 2019 – 30 Nov. 2020) are:

S.No. Products Price (Rs.) / BL

1 “C” Heavy Molasses 43.75

2 “B” Heavy Molasses 54.27

3 Sugarcane Juice 59.48 + GST & Transportation charges

The revision of prices of ethanol supplied from grains is also under consideration by the govt. in consultation with the distillery industry

In addition the govt. has also taken steps in consultation with the industry to set up and revise the prices of ethanol from time to time so that the industry feels protected about the production and supply of ethanol. A very recent price increase has been introduced by the govt. 01.01.2019, which now will bring the price of ethanol from various sources to the level given below w.e.f. 01/12/2019.

The revision of prices of ethanol supplied from grains is also under consideration by the govt. in consultation with the distillery industry.

The govt. of India very rightly announced use of surplus grains in addition to the spoilt and damaged grains for production of ethanol. The govt. has declared following surplus grains under this policy which could be used for production of ethanol for the year 2018-19. It will be further increased and announced from time to time by the govt. in consultation with the concerned departments. The present quantities of availability of surplus grains in the country which could be used by distilleries for production of ethanol are as below:

Will the petroleum companies be able to absorb the new price increase?

The setting up of prices are being announced by the govt. of India in consultation with the petroleum companies and it has been agreed that the prices have to be revised from time to time if the need be, to ensure continuous supply of ethanol and to increase its production as much as possible. The petroleum companies are part of the final prices of ethanol, calculated and announced by the govt.

What is the current requirements of ENA in the liquor industry ? Is there sufficient production to meet the needs of the industry?

Current requirement of ethanol as well as ENA depends upon the production and availability of raw materials for the basic production of Rectified Spirit (R.S)from which ENA and / or ethanol is produced. As per the present scenario the supply of ENA for liquors is being carried out by the industry alongwith supplies of ethanol. However, the market now competitive and has to be kept in mind for prices of liquor which are controlled by the state govts. Considering the market price of the ENA vis-a-vis that of Ethanol, it should be fair to the liquor industry as well.

A good quantity of grain spirit being produced is also in the market now and there sufficient quantity is available both for ENA and Ethanol as per the programme set up by the govt. However, it vastly depends upon competitive pricing and balanced affordability.

What incentives is the government giving for ENA production, both for domestic consumption as well as for exports?

The procurement and supply of ENA for potable purposes comes under the ambit of state govts. and the state govts. have to ensure good prices for IMFL for continuous availability of ENA in the competitive market of alcohol production in the field. The Central Govt. has no role for fixation or revising liquor rates and prices in the market, which is under the govts. of respective states.

What are the alternative feedstocks government is looking at for ethanol production besides traditional molasses and grain? And what are the challenges we have for the same?

The govt. of India has been on the look out for many alternatives, sources and resources for finding out alternative feed stocks for production of Ethanol. The govt. has already considered all feed stocks which are possibly available like agricultural wastes, forest wastes, bagasse, bamboo miscellaneous millets etc. and the research in this regard is continuously being undertaken for selecting and finalising the new feed stocks for production of ethanol.

There is an option under the research programme which will continue for searching out various resources of feed stocks and resources from all fields will be studied provided they are reasonably affordable and competitive with other feedstocks.

Will electric vehicles disrupt the demand for petrol and as a result the demand for ethanol?

No, in the near foreseeable future there is no possible disruption of demand for petrol or ethanol as a result of introducing electric vehicle in the country. The demand for petrol is rather expected to increase rapidly as the number of motor vehicles on the road is increasing by the day.

Illicit alcohol trade gives hangover to the nation