INDIA: Indian market continues down road to liberalisation

By Chris Brook-Carter | 11 July 2000

The Indian Ministry of Industry has decided to end the dividend balancing requirements for foreign liquor companies. The requirements are part of the export obligation commitments undertaken by any foreign drinks company operating in India.Industry sources also said that the government was considering to scrap export obligations altogether as part of the on-going liberalisation of the industry.Reports from the Ministry suggest that the government will announce next week its plans to finish with dividend balancing requirements because its forex reserves are at a comfortable level and the earnings from liquor companies are no longer required.Certain sectors of the Government also believes the harsh export obligations are stifling the growth of the drinks industry in India.Under current rules liquor multi-nationals are required to balance the outgo of dividends within seven years of operation to the parent company with imports of raw material and technology.The end to this rule will benefit the likes of Seagram, Pernod Ricard, Bacardi and UDV all of whom operate in India. However, Albert Elgrissy of Pernod Ricard's Indian operations said the move was a minor development."What would be clinching for the trade is the removal of export obligations altogether," he said.

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The Indian Ministry of Industry has decided to end the dividend balancing requirements for foreign liquor companies. The requirements are part of the export obligation commitments undertaken by any foreign drinks company operating in India.Industry sources also said that the government was considering to scrap export obligations altogether as part of the on-going liberalisation of the industry.Reports from the Ministry suggest that the government will announce next week its plans to finish with dividend balancing requirements because its forex reserves are at a comfortable level and the earnings from liquor companies are no longer required.Certain sectors of the Government also believes the harsh export obligations are stifling the growth of the drinks industry in India.Under current rules liquor multi-nationals are required to balance the outgo of dividends within seven years of operation to the parent company with imports of raw material and technology.The end to this rule will benefit the likes of Seagram, Pernod Ricard, Bacardi and UDV all of whom operate in India. However, Albert Elgrissy of Pernod Ricard's Indian operations said the move was a minor development."What would be clinching for the trade is the removal of export obligations altogether," he said.

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