India-EU FTA and the impact on wines

As readers of this newsletters must be aware, India and the European Union (EU) signed a much-anticipated free trade agreement (FTA) on January 27, 2026. The “mother of all deals” as both sides have called it marked the culmination of a process that began close to two decades ago, in 2007. A salient feature of the FTA is that import duties on wines from the EU that enter India have been slashed from 150 percent to 20 and 30 percent (depending on the price). Understandably, the move has triggered much cheer among importers, sommeliers and wine enthusiasts alike. However, such optimism carries the baggage of abundant caution and for good reason.

I’ve had the chance to speak some importers, sommeliers and a retailer and the gist of those conversations is this: the reduction on import duties is a good first step but much more needs to be done. For starters, the FTA itself has to be ratified by the European Parliament. That process itself will take approximately six months, which means that price reductions will only be visible December 2026 or January 2027 onwards. Second, the rupee’s continuous slide to the US dollar and the Euro is a matter of great concern. As an importer told me, it will be difficult for his community to pass on the benefits of the import duty cuts to everyone in the value chain — distributors, retailers and customers — if the base price itself increases due to currency fluctuations.

Third, as is well-known, individual states have the freedom to formulate policies and rules as they deem fit. As a result of which, there is regulatory asymmetry and stark differences in the final retail prices. So for instance, in Delhi, importers have to pay an excise duty, an additional excise duty and a value added tax (VAT), along with a label registration fee. However, in neighbouring Haryana, excise duty and VAT on wine is lower than Delhi. More importantly, there is no maximum retail price (MRP) on liquor in Haryana and retailers have the flexibility to set prices based on demand and supply. Now, if this regulatory asymmetry is extended to India’s other 26 states and eight union territories, the result is an operational and logistical nightmare for importers. Will the import duty cuts trigger certain states to revamp their existing excise laws? One can only hope but as of today, the answer is unclear.

Writing in The Hindu, sommelier Magandeep Singh makes the point that state taxes are high enough to cripple markets and each time there’s a duty cut, a new cess is introduced rendering the duty cut “ornamental”. Will history repeat itself with wine? One hopes not but again, there are no clear answers.

So is the import duty cut on wine merely good on optics and shallow on substance? Not quite. Devati Mallick, a sommelier based in Gurgaon, told me that the FTA could do for European wines what the India-Australia Economic Cooperation and Trade Agreement (ECTA), did for wines from down under — introduce a wider variety of wines at different price points to cater to different customers. Earlier, if customers wanted inexpensive Australian wine there was just Jacob’s Creek (Rs 850-900/bottle, if I remember correctly). The only fancier wine that a customer could buy was Penfold’s (Rs 8000-10000, approximately) with no other option in between. Thankfully, the ECTA changed all that and now there’s plenty to choose from not just in terms of grape varieties but also regions. Walk into any good wine store in Delhi or Mumbai and you’ll find bottles from Hunter Valley, Coonawara, Adelaide Hills and Clare Valley to name a few.

It’s a sentiment that Nikhil Agarwal, importer, retailer and a sommelier himself, also echoes. He reckons that importers will now be motivated enough to expand their portfolios and get lesser-known grape varieties into the Indian market. Agarwal estimates that even if the retail price drop comes down by just 10 percent, it will help the wine find a new customer. “I’ve had customers who say they want a wine that’s Rs 3000 or less. If it’s even Rs 3100 they will just not buy it because it’s out of their budget,” he told me “So if the price of a Rs 4000 wine falls to Rs 3600, it’ll psychologically make it appealing to someone who otherwise wouldn’t consider it.”

Like most others in his fraternity, Agarwal welcomes the import duty cuts in the FTA but adds that he’s “cautiously optimistic”. Change, he says, won’t happen overnight and wine-lovers will have to wait until the end of the year (or early 2027), for it to become visible.