UB Group, the Indian drinks giant controlled by billionaire Vijay Mallya, is buying Whyte & MacKay, the 163-year old Glasgow Scotch maker for £595 million.

Mr Mallya said: “The potential for premium Scotch whisky in India is enormous and, with this acquisition, we now have a strong portfolio of internationally recognised brands that we will immediately introduce into the Indian market and use our strong distribution muscle fully to our advantage.”

But UB will have to pay a 150 per cent tariff to export bottles of its whisky into its own country.

UB Group's purchase provides a 197.5 per cent return for Whyte & MacKay's owners Robert Tchenguiz, the property entrepreneur and his brother-in-law, Vivian Imerman, who have invested around £200 million in the business since first buying a stake in 2001 when management bought the company out from America's Fortune Brands.

Exporting spirits into India carries one of the highest tariffs attached to any product globally. UB will have to pay a 150 per cent premium on both the wholesale price of the whisky itself and the cost of bringing the alcohol into the country, for example freight and insurance fees.

A £10 bottle of Whyte & MacKay could end up costing UB £25 to get it into its own country. The Indian Government also charges high levels of tax on spirits which can swell export costs to as much as 500 per cent.

The acquisition of Whyte & MacKay coincides with a meeting this week between the European Union, India, the US and Brazil in Brussels aimed at reigniting the Doha trade talks on liberalising trade between countries.

Separately the Indian Government must also now stand before a dispute trade settlement panel being put together by the World Trade Organisation to discuss its reluctance to reduce tariffs and taxes on spirit imports. A panel decision is expected next April.

Last year, the Indian market consumed 120 million cases of spirits of which less than one per cent was made up of imported whiskey. According to the Scotch Whisky Association, the value of whisky sold in India last year was £24 million, down 6 per cent on 2005.

In contrast, China used to charge whisky importers a tariff of 65 per cent five years ago. This has now been reduced to 10 per cent and in the last five years, the value of whisky sold in the Chinese market has increased from £1 million to £60 million.

Whyte & MacKay will continue to be based in Scotland since under legislation Scotch whisky can only be made in Scotland. Mr Imerman, the former chairman and chief executive at Del Monte, will stay on at the group as a consultant and it is expected there will be no cuts made to the 600-strong workforce.

UB is hoping to import Whyte & MacKay's brands into both India and China. So far, Indian consumers have been able to drink blended whisky such as Teacher's and Johnnie Walker.

However, the market is dominated by domestically brewed whisky, which is made from molasses as opposed to the cereal base used to make Scottish whisky. Last year, Indian-made whisky sold 60 million cases.

Times Recommends

• Tories’ green bank to revolutionise power policy
• UK car industry receives £2.6bn injection
• Pru chief turns down seat on board of bank