Comprehensive work plan in India-EU FTA to address carbon tax concerns: official

New Delhi: The Carbon Border Adjustment Mechanism (CBAM) took a lot of negotiating capital during the India-EU free trade agreement (FTA) talks but the pact has a comprehensive work plan under an annex to address concerns, especially faced by small and medium enterprises, related to the mechanism, additional secretary in the Department of Commerce Darpan Jain said.

He said the legal scrub of the FTA is over and it could be signed this year and brought into force next year. The conclusion of the FTA was announced on January 27.

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“CBAM took a lot of negotiating capital…In the text, there is a separate Annexure on dealing with CBAM, and there are certain pillars on that. The first pillar is that in case of flexibility in future, that will be available to India. So there is an obligation in that,” Jain said at an event organised by the Indo-German Chamber of Commerce.

Under the CBAM, which came into effect on January 1, the EU will impose a carbon tax on goods such as steel, aluminium, fertiliser and cement. The tax applies to steel and aluminium products at present.

“Second, CBAM compliances are a concern among SMEs in terms of verification, finding out what is the value of embedded carbon, and ensuring that the verifiers are recognized by the EU authorities. There are separate provisions and we also have a provision in which we can engage with EU authorities on taking into account the carbon price, which is paid in India,” he said.

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Noting that India also is developing its own carbon pricing mechanism, Jain said: “How to offset what is paid in India from what is paid in Europe, so even that is part of it”.

“There is a comprehensive, I would say, work plan under annexure on CBAM and we are working on it and I am very hopeful that SMEs will not face any problem,” he said, adding that the commerce and industry ministry has chalked out an elaborate outreach programme for the India-EU FTA.

“We want to go to all the districts and conduct outreach programmes there and tell industry about what is there in the FTA, how they can use it, explore opportunities under that. We are also exploring other tools like electronic tools, so that we can engage with them specially small businesses,” he said.