India blocked a World Trade Organisation investigation of its import duties on European wine and spirits Tuesday, temporarily delaying a dispute that could also soon involve the United States.

An investigative panel will almost certainly be established to examine Delhi's compliance with international trade rules at a meeting later this month of the WTO's dispute settlement body, officials said.

India has introduced several measures "in the form of duties, which have continued to restrict the access of EU wines and spirits to the Indian market," Raimund Raith, trade negotiator for the 27-nation European Union, told the WTO's dispute settlement body.

The duties, according to the EU, increase the price of French wine and Scotch whisky fivefold, violating international trade rules.

India, which had previously indicated it would consider cutting the duties to avoid deepening the dispute, said it was "extremely disappointed" with the decision, which it labelled "premature."

Second request

Under WTO rules, a second request for a formal investigation is automatically approved.

The United States, which has also filed a complaint with the WTO about Indian treatment of American wine and spirits, said it shared the EU's concerns.

"The additional and extra additional duties India imposes on imported wine and distilled spirits appear to be inconsistent with India's WTO obligations," the U.S. told the 150-member WTO, adding that it hopes "India will resolve these disputes by eliminating any WTO-inconsistent duties."

The U.S. is still in consultations with India, but can ask for a formal investigation as early as May if the two sides fail to reach an agreement. A WTO case can take months - and even years - to be resolved, but can result in retaliatory sanctions being authorised.

India's basic import duties on wine are 100 per cent, while the tariff on spirits is at 150 per cent, both within WTO limits. However, various government surcharges take the tariffs up to levels reaching as high as 540 per cent depending on the Indian state.

The state of Tamil Nadu goes further still, shutting out foreign alcohol and allowing shops to sell only Indian-made spirits and wines.

- AP

India is one of the largest markets for alcohol in the world, according to the EU, and it has huge potential to grow.

So far, EU alcohol exports to India are a small percentage of their total world sales. India bought euro23.3 million worth of European spirits in 2004 _ from Scottish whisky to Finnish vodka _ and euro4 million worth of wine.

European spirits producers said their annual exports total more than euro5 billion (US$6.4 billion).

The wine industry sells euro4.5 billion (US$5.75 billion) each year.