Officials say the India-UK Free Trade Agreement (FTA) has provisions against CBAM, which could negate concessions provided by the UK to India.
It is expected that the UK CBAM will take effect from January 1, 2027 for imported products and will cover industries such as iron and steel, hydrogen, cement, aluminum and fertilizer.
“Because of the current uncertainty and lack of legislation, there is an understanding that India reserves the right to retaliate or rebalance against concessions in the future,” one official said.
“Rebalancing” will allow India to claim compensation for losses caused by its industry due to the mechanism.
It is also considered a shield to ensure that Britain has disputed India at the World Trade Organization (WTO).
According to the draft CBAM regulations released last week, the tax will only apply to goods originating outside the UK under the UK’s non-preferred origin rules.
India's power of retaliation and rebalancing are of great significance as the EU also has CBAM regulations and India is negotiating a trade agreement with the group. EU CBAM will be implemented on January 1, 2026, and the industry is expected to impose a 20-35% tax on EU's option import tax.
