India may take away concessions if UK imposes carbon border tax

India may consider taking away concessions granted to imports from the UK under the India-UK Comprehensive Economic and Trade Agreement (CETA) if London imposes non-tariff barriers like the Carbon Border Adjustment Mechanism (CBAM), a government source said on Friday.

The UK is scheduled to implement CBAM in 2027 to address carbon leakage and support the country’s decarbonisation goals. Under this mechanism, those exporting goods to the UK have to report the carbon content of the commodity, based on which they will be taxed.

According to the source, India raised the issue of CBAM during the Free Trade Agreement (FTA) negotiations. However, it was not made part of the agreement as the UK side conveyed to Indian officials that the CBAM is not yet in existence.

The New Delhi and London have also agreed that the former will have freedom to re-balance trade benefits if the CBAM negates trade benefits of India under the FTA, the source added.

“We will also have the right to take counterbalancing measures. India can take away concessions, and there will be a mechanism for that,” it said.

Once implemented, the CBAM would impact India’s steel, iron and aluminium exports to the UK.

According to the Ministry of Commerce, the India-UK FTA commits “immediate and full” tariff elimination on these products.

Earlier, the tariffs were as high as 10 per cent.

“The combined UK import demand for steel and products of iron and steel is $18.46 billion. India currently supplies only $887 million, which is 4.8 per cent of UK’s total import demand. Even capturing 30–40 per cent of the UK’s import share could push exports close to the $7.5 billion target,” the government said.

India and the UK signed FTA on Thursday, committing to eliminate tariffs on 99 per cent of Indian exports. The agreement is also expected to open new markets for British whisky and automobiles and create thousands of jobs in both nations.

Negotiations for the India-UK CETA started in January 2022. The agreement aims to double the bilateral trade from $56 billion by 2030.

The UK is among India’s top 10 export destinations.

According to data available with the Commerce Ministry, India had exported goods worth $14.55 billion in 2024-25 (April-March), and had imported goods worth $8.61 billion in the year.

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