India is demanding an exemption from Britain’s planned carbon tax as part of negotiations aimed at sealing a free trade deal before the UK general election.
India’s negotiating team held a series of surprise negotiations in London this week to overcome remaining hurdles in the deal.
Rishi Sunak is keen to cross the line on a trade deal and hoped to seal it last month.
India has used Sunak’s limited time left before the general election as a bargaining chip. A British government official said Indian negotiators had “five years to plan the way forward, but the government says it has five months.”
The talks come as India begins a six-week general election campaign starting Friday. Indian opinion polls predict Prime Minister Narendra Modi’s Bharatiya Janata Party to win for the third time in a row. Meanwhile, British opinion polls suggest Mr Sunak’s Conservative Party is on track to lose.
India’s commerce minister said on Monday that there were “very few outstanding issues” and that a deal was close to being finalized.
British government officials briefed on the progress of negotiations said India was seeking an exemption from Britain’s planned Carbon Border Adjustment Mechanism (CBAM) because it is a developing country.
Early in the talks, India had expressed concerns about the application of CBAM (planned tax on imports of carbon-intensive goods such as steel, glass and fertilizers). The tax will affect Indian steel manufacturers looking to export to the UK.
The decision to exempt India from carbon tax will be controversial. The plan aims to reduce emissions and support British steel producers by leveling the playing field with countries with low or no carbon taxes.
This week’s talks continue the 14th round of formal negotiations between the UK and India. The round was declared over last month ahead of India’s election campaign, but another British government official said it continued at India’s request.
This week’s discussions involving India’s chief trade negotiator have been kept secret in Britain but have been picked up by the Indian media.
India is also seeking further concessions on visas and social security agreements for Indian workers, long-standing issues in negotiations. Talks in London are due to end on Friday but could continue remotely next week.
Before Monday’s talks, Indian Commerce Secretary Sunil Balswal told the media: “The team will be in the UK this week. There are few outstanding issues left in the negotiations. Some key priorities to get the deal done. Matters are being resolved with a balanced outcome.”
India is notoriously tough in trade negotiations. Last month, the government signed a £79bn trade deal with the European Free Trade Association, made up of Norway, Switzerland, Iceland and Liechtenstein, 16 years after negotiations began.
The UK and India began trade negotiations in January 2022, during Prime Minister Boris Johnson’s tenure. Prime Minister Boris Johnson said in October 2022 he wanted the deal to be “completed by Diwali”, but that deadline has now been exceeded by 18 months.
A Department for Industry and Trade spokesperson said: “The UK and India continue to work towards an ambitious trade deal that will benefit both countries.” I won’t comment on the details of the actual negotiations, but we have no plans to change our immigration policy to achieve this free trade agreement. The Secretary of State for Business and Trade has always made it clear that he will only sign deals that are fair, balanced and ultimately in the best interests of the British people and economy. ”
