Finance Minister Nirmala Sitharaman on Wednesday said the European Union’s Carbon Border Adjustment Mechanism (CBAM) to tax certain imports is “unilateral and arbitrary” but it won’t derail India’s Free Trade Agreement (FTA) talks with the 27-country customs-and-monetary union.
Besides CBAM, other unilateral measures like linking deforestation to trade are de-facto trade barriers disrupting supply chains and would hurt energy transition in emerging countries like India, she said at a Financial Times event here.
“So, there are such not-so-helpful ways in which developed countries follow certain policies which are unilateral and I’m sorry to say, arbitrary,” Sitharaman said, adding that these measures would hurt Indian industry. These measures meant developing countries would be funding decarbonisation in developed countries, she added.
The CBAM will come into effect from January 1, 2026, but from October 1, 2023, companies from seven carbon-intensive sectors, including steel, cement, fertiliser, aluminium and hydrocarbon products are mandated to share data about carbon emissions with the EU. According to estimates, the CBAM will result in an additional 20-35% duty on exports to EU.
CBAM will impact India’s $8.2 billion (in CY 2022) exports of Iron ore pellets, iron, steel, and aluminium products to the EU by over a thousand large, medium and small firms. India’s 27% export of these products goes to the EU.
The government is seized of the issue and has raised the matter with the EU and would continue to do so, Sitharaman said.
“I’m sure it will not be escalated to the level of hurting the talks. It is an important component of wanting better trade relations, but our concerns will definitely be voiced,” the minister replied when asked if CBAM would hurt FTA talks.
India and the EU resumed negotiations on the FTA on June 17 2022 after a gap of over eight years and have made significant progress.
Commerce and industry minister Piyush Goyal had earlier said that the government would consider the EU’s suggestion that New Delhi could devise its own mechanism instead of paying the carbon tax to the union. India is seeking exemption from this tax for its small and medium companies.
India, which has a proven record in decarbonisation action, believes the move by the EU to impose a carbon tax on imports of certain bulk commodities is ill-conceived. The commitments given in COP 21 were fulfilled by India well ahead of time, with its own resources. India has set the goal of Net Zero by the year 2070.
The minister also voiced concern over the EU’s Deforestation Act, which could create major disruptions in the supply chain. EU’s Regulation on Deforestation-free Products (EUDR) aims to reduce the EU’s impact on deforestation and forest degradation. The EUDR requires businesses to prove that the production of certain commodities did not cause deforestation.
The minister said the Production-Linked Incentive (PLI) scheme for 13 sunrise sectors, including green energy and hydrogen missions are part of the measures towards reducing transition costs for citizens and businesses. India’s Budget is also not constrained when it comes to promoting green sectors, she said, citing initiatives like the PM Surya Ghar Muft Bijli Yojana to support common citizens.
She also said India would prioritize developing indigenous capacities, particularly in electric vehicles (EVs).
From: financialexpress
Financial News
