The free trade agreement (FTA) talks between India and the UK are all set to be finalised before Diwali, sources told Zee Business. The development assumes significance after Prime Minister’s Office Modi held an important meeting on Monday. The move is seen as good news for liquor stocks as under the FTA, the government aims to reduce the existing duty on high-end products imports significantly. As per the plan, the government would cut down duty from 150% to 30% in the period of three years.
The government would gradually slash import duty on high-end products from 150% to 100% in the first year, 50% in the second and 30% by the end of the third year once the FTA is signed between the two countries. This move is also expected to open a big export market for liquor in Britain.
It is also learnt that the UK Government has also agreed to give some relief on maturation condition. Under the maturation condition, only liquor with three years maturity were to be sold in the UK. Now, the UK government is planning to create a separate category—Indian imported liquor— to help Indian liquor exports from maturation condition.
Earlier, London Lord Mayor had also told PTI that the free trade agreement talks between India and the UK are now in their final phase and despite some outstanding issues to be resolved, there is optimism on both sides that the Diwali deadline for a draft will be met.
“Prime Minister Modi has made it clear that he wants to sign the FTA by Diwali. There are some outstanding issues to be resolved but I think there’s a lot of optimism on both sides that we will get that done. Whatever the content of the agreement, it will be a real positive for the relationship between India and the UK across the board in the coming years,” Vincent Keaveny, the 693rd Lord Mayor, who had returned from a four-day visit to India following meetings with leading Indian businesses and investors and finance chiefs at the Reserve Bank of India (RBI) and Securities Exchange Board of India (SEBI), told the news agency.
Talking about the development, Zee Business Managing Editor Anil Singhvi said the FTA will help exports of both countries. He said it will help United Spirits stock the most as most of the products of the companies are imported from Britain.
Explaining it further, Anil Singhvi said if a bottle of United Spirits, which cost Rs 1000 comes is imported to India with 150% duty, the rate surges to Rs 2500 per bottle. Besides, with other expenses and duty, it is sold at around Rs 4000 in the Indian market. However, once the duty is capped at 30%, the same bottle becomes significantly cheaper, pushing demand to a new level.
The market guru sounded very bullish on the sector and said entire liquor space is due for big time re-rating soon.
Shares of United Spirits jumped around two per cent to Rs 868.50 per share in BSE intraday trade on Tuesday.