India-Australia Trade Pact Stalls Over Dairy and Wine Tariffs

India-Australia Trade: Hopes of sealing a full-fledged India-Australia trade pact by the end of this year have dimmed as India refuses to bow to Australian demands for deeper tariff cuts on dairy and alcoholic beverages, according to two senior Indian government sources familiar with the ongoing negotiations.

While the two nations made notable progress with an interim Economic Cooperation and Trade Agreement (ECTA) in 2022—slashing duties on a variety of goods—momentum toward a broader Comprehensive Economic Cooperation Agreement (CECA) has recently slowed. The sticking points? Dairy and wine.

“There is no question of agreeing to Australia’s demands for further tariff cuts on dairy and wine,” a senior Indian official directly involved in the talks confirmed. “It could negatively impact millions of farmers and destabilize our budding wine sector.”

The official, speaking on condition of anonymity, highlighted the mounting pressure from influential agricultural groups. The $35 billion alcoholic beverage industry, along with local wine producers, has also voiced strong opposition to any further concessions.

India-Australia Trade: Dairy and Wine – Sensitive Terrain

Under the interim pact, tariffs on Australian wine above $5 per 750ml bottle were reduced from 150% to 100%, with a roadmap to bring it down to 50% over a decade. For wines priced over $15, tariffs dropped to 75%, with an eventual goal of 25%. However, Australia is now lobbying to both speed up these reductions and lower the price thresholds that trigger them.

The India-Australia trade pact hit a further snag with Australia’s demand for better access to dairy products such as cheese, high-protein whey concentrate, and lactose, currently taxed between 20% and 30% in India. The sector, however, remains culturally and politically sensitive. India’s dairy landscape supports hundreds of millions of small-scale farmers and is deeply intertwined with traditional dietary habits.

“Even affordable Australian wines that cost A$10-15 at home end up selling for over A$100 in India because of the cumulative tariffs and taxes,” said Lee McLean, CEO of Australian Grape & Wine. “There’s growing demand in India, and both sides stand to gain—our wines differ in taste and target different market segments.”

Karl Ellis from Dairy Australia acknowledged the limitations of mainstream dairy exports to India but pointed to promising niches. “High-protein whey and speciality cheeses could find demand. But the current tariffs are simply prohibitive.”

India Draws a Red Line, Offers Middle Ground

India’s hardline stance, however, does not close the door entirely. A second government source said that while agricultural concessions are off the table, New Delhi is willing to lower tariffs on non-agricultural industrial goods and is actively seeking more liberal terms in services and visa access.

The same source noted, “We’re committed to a balanced and meaningful agreement, but not at the cost of our farmers or domestic industries. Strategic sectors must remain protected.”

Despite the impasse, both sides remain diplomatically optimistic. In a brief statement, Australia’s Department of Foreign Affairs and Trade reiterated the shared political will between Prime Ministers Narendra Modi and Anthony Albanese to conclude the CECA and bolster the India-Australia trade pact.

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