India's Resilience Against UK's Carbon Tax Plan

India has reserved the right to respond if the UK presses forward with its plan to impose a carbon tax on domestic goods, an official declared Thursday.

The India-UK free trade agreement, publicly announced on May 7, lacks measures to counter the proposed British carbon tax.

The UK government's Carbon Border Adjustment Mechanism (CBAM) will commence in 2027.

Correspondingly, the official noted that if India independently enacts a similar tax, Indian industries wouldn't face additional UK taxation.

According to the economic think tank GTRI, India's exports worth USD 775 million to the UK might suffer due to the UK's decision to tax products like iron, steel, aluminium, and cement starting in 2027.

The free trade agreement contains no countermeasures against CBAM, which could offset trade concessions granted to India.

After the EU, the UK will be the second economy to enforce CBAM, initially focusing on iron, steel, aluminium, fertiliser, and cement sectors.

This tax may fluctuate between 14%-24% of the import value upon the full removal of free allowances under the ETS (Emission Trading System).

During a recent London visit, Commerce and Industry Minister Piyush Goyal expressed concerns over the tax and suggested possible retaliation.

(With inputs from agencies.)