The United States and the European Union have raised objections to high import duties levied by India on their wines and other alcoholic products. Anjana Pasricha reports from New Delhi that the dispute has erupted as India emerges as one of the world's fastest growing markets for wine.
Whisky has been the drink of choice for middle class and rich Indians for decades. But in a quickly modernizing India, many are exchanging Scotch for wine.
Aman Dhall, executive director of India's largest importer of wines, Brindco, says there has been a radical shift as women and men in both small and large cities switch to wine.
"I would say it is the global trend…there is a lot of international travel, so there is a cross- assimilation of cultures, and people are realizing there is more to life beyond just drinking hard drinks," he said.
The growing Indian wine market is attracting huge international interest, but high taxes are making access difficult for foreign wine producers.
An array of levies imposed by India on imported liquor can add up to a whopping 550 percent, making French, Spanish or Californian wines prohibitively expensive. A bottle of wine that costs four dollars in Europe or the U.S. will be priced at about $20 in India, out of reach for the middle class.
That has prompted both the United States and the European Union to file formal complaints with the World Trade Organization about the high tariffs imposed by India.
New Delhi justifies the high taxes on two grounds: it wants to promote a nascent wine industry which arose just a decade ago and is growing by leaps and bounds. India also argues that Europe and the U.S. subsidize the inputs that go into the manufacture of wine and spirits.
But importer Dhall says high tariffs on imported wine need to be lowered because domestic production is unable to meet the rapidly growing demand.
"The demand in India outstrips the supply. If you have large tariffs, you are not giving the consumer the power of choice," he said. "I think there needs to be a balance between protecting the domestic industry, as well as at the same time promoting imported alcoholic products to come freely into India."
A growing club of wine enthusiasts also complains that wine will not become a mass consumption product unless duties on imported wines are slashed.
India's wine consumption is still tiny in a potential market of one billion people. The five million bottles consumed every year add up to a mere half a teaspoon per head. But this could change dramatically with the continued rapid growth of the middle class.