Centre looks into options to counter EU’s carbon tax plan

Retaliatory tariff measures and a challenge at the World Trade Organisation among measures considered  

May 06, 2023 12:56 am | Updated 12:56 am IST - NEW DELHI

Representational file image of steam emitting from a crude oil refinery in Kochi, Kerala.

Representational file image of steam emitting from a crude oil refinery in Kochi, Kerala. | Photo Credit: AP

The Commerce Ministry is exploring various options to cope with the European Union’s decision to introduce a Carbon Tax, including retaliatory tariff measures, a challenge at the World Trade Organisation and measures to help smaller Indian exporters, a top trade official said.

The EU plans to introduce a Carbon Border Adjustment Mechanism (CBAM) that will entail a monitoring mechanism for imports from producers deploying non-green technologies starting this October and a tax levy from January 2026. The move is expected to significantly hit Indian metal and engineering products’ exports to the EU.

Addressing this challenge is one of the top agenda items for the Commerce Department and several options are currently being examined, Director-General of Foreign Trade Santosh Kumar Sarangi said at a meeting hosted by engineering goods exporters’ body EEPC India on Thursday.

How can EU’s carbon tax hurt India?

“How do we create mechanism which will support Micro, Small and Medium Enterprises [MSMEs], our steel industry, our aluminium industry… is something on which the Department of Commerce, the Ministry of Steel and the MSME Ministry, all are trying to work together,” he said.

EEPC India chairman Arun Kumar Garodia made a pitch for including the primary iron and steel sector into the Remissions of Duties and Taxes on Exported Products (RoDTEP) scheme and raising the scheme’s benefits for engineering products.

“The rebate given by RoDTEP for engineering sector is mostly in the range of 0.5% to 1%, which is significantly lower than the incentives provided under the earlier Merchandise Exports from India Scheme that offered incentives in the range of 2% to 5%,” he stated.

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