India will respond appropriately if the UK levies Carbon Border Adjustment Tax (CBAM) on Indian exports, commerce minister Piyush Goyal said on Saturday, as the trade agreement signed between the two nations does not have an explicit provision around such a levy.
“Carbon tax is getting postponed repeatedly, even European Union (EU) hasn’t implemented yet, United Kingdom (UK) will contemplate such a levy even after that. When that time comes, India is not weak and will respond appropriately. Whoever puts a non-tariff barrier on our trade, India will give an appropriate response,” Goyal said, according to a Moneycontrol report.
Even as the UK has agreed that India can take counter-balancing measures if it implements CBAM, this understanding isn’t part of the Comprehensive Economic and Trade Agreement (CETA) signed on July 24, given that London is yet to implement this levy.
The UK government will implement CBAM by 2027, a policy that puts a price on the carbon emitted by imports.
The liability applied by the CBAM will depend on the greenhouse gas emissions intensity of the imported good and the gap between the carbon price applied in the country of origin (if any) and the carbon price that would have been applied had the good been produced in the UK, according to the British government.
Trade expert Ajay Srivastava, founder of GTRI, had on Thursday argued that by not securing a carve-out or exemption clause on CBAM, India lost a ‘vital opportunity’ to protect its carbon-intensive exports. “From January 2027, the UK can impose carbon taxes on Indian steel and aluminium, even as we grant UK goods duty-free access. That’s a serious asymmetry,” he said the day India signed the deal with the UK.
Game changer
Minister Goyal described the FTA as ‘game changing’ which would benefit every section in India including farmers, youth, MSME sector and Industry. Addressing a press conference at the BJP headquarters in Delhi, Goyal attributed India’s success in signing the FTA to Prime Minister Modi’s leadership and said, “It is a game-changing agreement.”
Goyal also asserted that the agreement was signed “confidently” on India’s terms while protecting “sensitive items” like agriculture and ethanol. “I believe that this FTA carries a very big message for the future economy of India. We will all see the benefits that India will get under it in the coming years,” he said.