by Aditya Kalra
NEW DELHI, July 12 (Reuters) – Pernod Ricard has suspended new investments in India over long-running tax disputes with the country’s authorities over the valuation of alcohol imports, according to two sources familiar with the matter and letters of the company consulted by Reuters.
The world’s second-largest spirits group said its legal disputes have steadily worsened since they began nearly 30 years ago, making it difficult to manage its affairs in the country and raising the possibility of consequences for the finances of the society.
The maker of Chivas Regal whiskey and Absolut vodka is lobbying Indian authorities, including Prime Minister Narendra Modi’s office, to resolve the issue.
“This interminable litigation has weighed heavily on our ease of doing business and has prevented our group, headquartered in Paris, from making new investments to develop its activities in India”, wrote Pernod Ricard in a letter sent on 24 November at Narendra Modi’s office.
“These disputes, which arose in 1994 on the occasion of the assessment of imports by the customs authorities, have worsened year by year and are still continuing.”
Pernod Ricard’s position casts a shadow over the group’s growth in a region it says is among its “key strategic markets”. He believes that India and China, the two most populous nations in the world, will be the main growth drivers for the alcoholic beverage industry over the next decade.
India’s alcohol market, estimated at $20 billion, could grow 7% annually over 2021-25, with whiskey and spirits among the favorites, according to IWSR Drinks Market Analysis. In volume, Pernod represents 17% of this market, against 29% for its competitor Diageo.
Pernod Ricard referred in its letters to a disagreement with officials over the valuation of its imported liquor bottles and raw material as well as the payment of taxes on them.
In a document attached to the letter addressed to Narendra Modi and addressed to the Indian Central Board of Excise and Customs (CBIC) on May 27, Pernod Ricard states that the lack of certainty in the valuation of imports was affecting its current activities and had a “severe impact” on its expansion plans.
Neither the CBIC nor the Indian Prime Minister’s office responded to requests for comment on the letters, which were not previously published.
Pernod Ricard also told Reuters in a statement that it was in “permanent dialogue” with the Indian authorities in order to find “a rapid solution to this long-standing affair”.
The group collects all relevant information to facilitate the correct reassessment by the authorities and aims to preserve the rights of Pernod Ricard while “avoiding any disruption of the activity”, adds the press release. (Reporting Aditya Kalra in New Delhi; French version Dagmarah Mackos, editing by Kate Entringer)