Dealing with EU’s carbon tax is high on the agenda : DGFT

NEW DELHI : Decision on ways to deal with European Union’s move to introduce Carbon Border Adjustment Mechanism (CBAM) is high on the agenda of Department of Commerce, said Santosh Kumar Sarangi, Director General, Directorate General of Foreign Trade (DGFT) and Ex-officio Additional Secretary to Government of India during a session organised by EEPC India.

Addressing the concerns raised by MSMEs over the impact of CBAM in the session held on Thursday in Mumbai, Sarangi said that India has been exploring various options including ways in which retaliation could also be done or raising the issue at WTO level or extending support to the MSMEs.

“Therefore, there are various options which are currently being examined. So, this is one of the top agenda items of Department of Commerce, ” he said.

Sarangi said that EU would unlikely defer the introduction of CBAM and monitoring mechanism would kick in from October this year followed by levying of carbon tax from 2026.

“So, how do we create mechanism which will support MSMEs, our steel industry, our aluminium industry is something on which Department of Commerce, Ministry of Steel and Ministry of MSME all are trying to work together,” he said.

He further said that the exact contours of support and exact contours of dealing with EU have not really been finalized yet and work is still in progress.

Sarangi lauded the efforts of exporting community in achieving record exports and assured that as and when the issues related to carbon tax by EU comes to DGFT full support would be provided.

“Our overall exports of both goods and services used to remain in a band of 450-500 billion US dollar for a very long time. For more than a decade it was not able to escape that trap of 500 billion dollar and in goods we could not escape that 300 billion dollar threshold. So, for a very long time it was within a 10% plus/minus range of 300 billion dollar. In 2021-22, it was for the first time that our goods exports went beyond 400 billion dollar and our services and goods exports together we achieved about 676 billion dollar,” the DGFT said.

Participating in the session, Rajesh Kumar Mishra, ADGFT highlighted the features of amnesty scheme for exporters for one-time settlement of default in export obligations.

In his welcome address at the session, EEPC India Chairman Arun Kumar Garodia said that the new Foreign Trade Policy (FTP 2023) is a crucial step towards achieving India’s ambitious export targets and enhancing the competitiveness of Indian industries.

He noted that policy is focused on boosting exports and reducing trade barriers, providing support to exporters, and promoting ease of doing business.

While appreciating the policy action steps in the FTP 2023, he raised some concerns of the exporters and urged the government to address them.

“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 (MEIS), which offered incentives in the range of 2% to 5% of FOB,” he stated.

Garodia also pointed out that primary iron and steel sector has been kept out of the scheme’s purview, which has further compounded the challenges faced by the exporters.

Pankaj Chadha, Senior Vice Chairman and Anoop Marwaha, Regional Chairman of EEPC India were also present on the occasion.

Participating members gave their suggestions to boost exports from India.

In the wake of recent Supreme Court decision upholding the requirement of ‘pre-import condition’, the members expressed their apprehension that they will have to pay exorbitant interest and sought for interest waiver.

The exporters felt that they are left with two options either to approach the Supreme Court to challenge the decision or approach the revenue department for waiver of interest charges.

On issues related to fixation/revision of RoDTEP rates, the DG, DGFT advised members to approach the Pillai committee set up by the DoC for any fixation or revision in rates.