Scottish distillers are threatening to return to the World Trade Organisation if they are not given fair access to India, the world's largest whisky market.

The Scotch Whisky Association (SWA) has complained to Indian officials over the duties levied on imported spirits across India, which it says discriminate against its members' brands. The Scottish industry, which has waged a 20-year battle against India's draconian tariff system, won a verdict against the country at the WTO last year under which central government taxes were lowered to 150 per cent from 550 per cent, but says that ruling is now being flouted by new levies imposed by individual states.

The dispute led to a bitter exchange this week between two of the trade's leading figures.

Paul Walsh, the Diageo chief executive and chairman of the SWA, gave warning that "the industry will not hesitate to return to the WTO" if states do not drop discriminatory taxes. The SWA has written to the European Union to highlight its concerns.

The approach was criticised by Vijay Mallya, the billionaire head of UB Group, India's largest spirits producer. He accused the SWA of being "paranoid" about India and gave warning that the body's "heavy handed" approach could jeopardise Scottish distilleries' prospects in the country.

Mr Mallya, who bought Whyte & Mackay for £595 million in 2006, controls about 60 per cent of the Indian whisky market.

Just 1 per cent of the estimated billion litres of whisky downed in India is produced outside the country, as import duties shield home-brewed "Indian made foreign liquor" — domestic brands created to resemble international products, sales of which are increasing an estimated 9 per cent a year.

India's duties regime is enough to give the hardiest vintner a sore head: already the world's largest consumer of spirits, the country is now finally developing a taste for wine, but foreign producers are being locked out by sky-high tariffs.

The sub-continent is set to triple its wine consumption in the next three years, to about 188,000 hectolitres, according to The International Wine and Spirits Record (IWSR). The rise is being driven by soaring numbers of foreign residents, tourism, and an increasingly well-heeled domestic middle class, the consultancy said.

Only 25 per cent of the wine consumed in India is imported, however, as the country's domestic vintages enjoy the protection of import duties.

India's protection of its £7 billion alcohol market has thwarted both international drinks company executives and consumers with sophisticated palates, critics say.

In 2006, the European Union filed a case at the World Trade Organisation over the regional tariffs imposed in India, which boosted duties on wines to as much as 260 per cent and to 550 per cent for spirits. The taxes represented "some of the highest duties for any products anywhere in the world," it said.

However, Indian officials say that those who feel the effect of the taxes — rich consumers — can afford to pay. The hordes of Western expats currently flocking to cities such as Bombay, India's commercial capital, for instance, are typically told to expect a sharp cut in their cost of living compared to home — except for the massive rents decent apartments command and the price of enjoying imported alcohol.

Meanwhile, with sales growth of alcoholic drinks expected to remain lacklustre in saturated Western markets, foreign producers continue to eye India. With per capita consumption of wine in India languishing at about 9 ml, compared with 400 ml in China, the sub-continent is being singled out as a key target.

World consumption of spirits reached 2.2 billion nine litre cases in 2006, but the rate of growth is expected to remain below 2 per cent a year until at least 2011.

Susan Schwab, the US Trade Representative, is among those to have cried foul over import duties. "With its fast-growing middle class, India could be an important export market for American wines and distilled sprits if not for these layers of duties," she said last year.

Arguing there was a demand for foreign alcohol in India, she noted that at duty-free shops, where Indian duties do not apply, US exports for wine grew 350 per cent from 2000 to 2005.

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