Union Commerce and Industry Minister Piyush Goyal has said the India–European Union Free Trade Agreement (FTA) is structured to protect Indian industries from the impact of the EU’s carbon tax while promoting cooperation on decarbonisation.
Addressing concerns over the European Union’s Carbon Border Adjustment Mechanism (CBAM), Goyal said the FTA includes a “most favoured nation” clause that ensures India will automatically receive any carbon tax concessions the EU extends to other countries. “If the EU gives any concessions to any country on the carbon tax, India will get them simultaneously,” Goyal told ANI.
Carbon pricing panel, credit for taxes paid in India
Goyal said a technical committee will be set up under the agreement to review carbon pricing mechanisms in both India and Europe. This will allow credit for carbon taxes already paid in India and streamline verification processes domestically, eliminating the need for verification in Europe.
“Critics are not able to understand that we have been able to extract significant concessions from the European Union,” he said, adding that the EU recognises India’s progress in green energy and sustainable manufacturing.
“They want to support India’s efforts to decarbonise to protect the environment. This is a holistic agreement that not only safeguards us from adverse impacts of carbon taxes but also promotes joint cooperation to decarbonise our economy,” Goyal said.
The minister’s remarks come amid criticism from the Congress, which has flagged CBAM as a major non-tariff barrier for Indian exporters. Earlier this month, Congress leader Jairam Ramesh said Indian steel and aluminium exports to the EU would face a carbon tax from January 1, 2026, when CBAM is fully implemented.
In a post on X, Ramesh noted that India’s steel and aluminium exports to the EU averaged $5.8 billion in FY25, down from around $7 billion the previous year as importers prepared for CBAM.
Exporters may cut prices to absorb tax impact
Citing estimates by the Global Trade Research Initiative (GTRI), Ramesh said exporters may be forced to cut prices by 15–22 per cent so that EU importers can absorb the carbon tax.
He added that stringent documentation and emissions reporting requirements would further increase compliance costs for Indian exporters, arguing that any India-EU FTA must account for this “unacceptable non-tariff barrier”. Goyal also sought to allay concerns about the agreement’s impact on Indian agriculture, saying the sector remains fully protected. “There is absolutely no problem for farmers. On the contrary, new markets open up for them,” he said, adding that key agricultural and animal husbandry products such as rice, wheat, maize, soy, dairy products, cereals and pulses have been excluded from the agreement.
‘India at high table of geopolitics’
Calling the FTA a landmark deal, Goyal said it places India “at the high table of international geopolitics” and reflects the country’s growing economic and strategic importance under Prime Minister Narendra Modi’s leadership. “This FTA with 27 developed nations, with whom we do not compete but complement each other, allows us to become a force multiplier,” he said, highlighting expected gains for sectors such as textiles.
99% export market access under India-EU FTA
India and the EU on Tuesday announced the conclusion of negotiations for the long-pending Free Trade Agreement, marking a key milestone in one of India’s most strategic economic partnerships.
With a combined market size of around $24 trillion and a population of nearly 2 billion, the FTA is expected to unlock significant opportunities for trade and innovation. It provides market access for over 99 per cent of India’s exports by trade value, while preserving policy space for sensitive sectors and safeguarding India’s developmental priorities.
