Trade Deal Fails to Mention About Carbon Tax

 Chennai: Despite the India-UK deal eliminating tariffs on 99 per cent of Indian exports, India will still be at a disadvantage if the carbon tax is levied on Indian products starting from 2027.

As part of the deal, the UK will eliminate tariffs on approximately 99 per cent of tariff lines and nearly 100 per cent of trade value.

In return, India will progressively reduce duties on 90 per cent of its tariff lines, with 85 per cent of UK exports set to become duty-free over the next decade. The deal will result in India’s average tariff on UK products coming down from 15 per cent to just 3 per cent.

However, the India-UK FTA does not include the Carbon Border Adjustment Mechanism (CBAM) or the carbon tax. The UK plans to implement a carbon tax mirroring the European Union’s CBAM from 2027.

The carbon tax can increase the cost of Indian products, probably 25 to 30 per cent while British products will continue to come in tariff-free or at reduced tariffs.

As per the European Union model, the CBAM will initially cover products like steel, aluminium, hydrogen, fertilizers, cement, iron and power in the first year. Progressively, it will add more products under the tax and by 2033, carbon tax will be levied on almost all the industrial goods, said GTRI.

According to Pankaj Chadha, chairman, Engineering Export Promotion Council hopes to cross the bridge when it comes. “They have said that they might introduce a carbon tax. When they introduce it, we will take it up with them. They have to provide reference values based on their domestic industries. Once they provide the reference value, we will look into it at that point,” he said.