‘India reserves right to retaliate if U’'s proposed carbon tax hits exports’

PTI New Delhi

The India-UK free trade agreement has no provision to counter Britain's proposed carbon tax, but amid uncertainty and absence of UK legislation, New Delhi has preserved its right to retaliate or rebalance concessions, if future measures impact domestic exports, an official said. The UK government in December 2023 decided to implement its Carbon Border Adjustment Mechanism (CBAM) starting 2027.

According to economic think tank GTRI, India's exports worth USD 775 million to the UK may be impacted due to Britain's decision to introduce carbon tax on products such as iron and steel, aluminium, fertiliser and cement, from 2027. 

The official said that the free trade agreement (FTA) with the UK has no provisions to counter CBAM, which has the potential to nullify the concessions offered by Britain to India. "Because of current uncertainty and no legislation in place, there is an understanding that India will/ has preserved its right to retaliate or rebalance the concessions (in future)," the official said.

The UK, after the EU, will be the second economy to implement CBAM. It calls it the import carbon pricing mechanism and it will initially focus on sectors like iron, steel, aluminum, fertiliser, hydrogen, ceramics, glass, and cement.

India, UK drop key demands in FTA talks to respect mutual sensitivities: Official

India and the UK have respected each other's political sensitivities during the negotiations for FTA, with New Delhi agreeing to drop its demand on post-study work visas for students in exchange for Britain withdrawing its request to open up legal services here, an official said on Wednesday. Meanwhile, India will not give any duty concessions to British businesses on a number of sensitive industrial goods like diamond, silver, smartphones, and optical fibres under the FTA with the UK, an official said.