India mulls law to fight EU carbon tax

NEW DELHI: The government is mulling a law to ban Indian airlines from participating in the European Union’s stringent carbon tax scheme.

India is considering its first retaliatory steps in the wake of 26 key nations’ decision – including Russia and China -during a meeting in Moscow on Wednesday to confront the EU for unilaterally imposing carbon taxes on all flights landing or flying out of the eurozone.

While the Indian flight operators could also be banned from accepting the EU conditions under an executive order, New Delhi is mulling if a law would provide a more robust legal defence to its decision in case of a legal challenge at home or any dispute settlement mechanism abroad.

Sources in the government said that disallowing Indian operators from taking part in the EU directive could be the easiest first step to retaliate against what it sees as purely a trade measure being bandied as a climate change bogey.

Though the EU tax scheme is in place, the process begins only next year, giving India a year to put in place its counter-measures. Imposing allowances, levies, cess and counter-tax on European air services could be the next step, government sources told TOI. This would help the government collect an equal amount of money from the EU operators to compensate for the additional cost to be incurred by its own airline operators.

While European fliers run more than 180 flights to India under current bilateral agreements, India runs less than 100. Also a substantial numbers of fliers to Europe, the government has noted, are passengers in transit to other destinations. These passengers could easily bypass eurozone, while availing other international routes.

Sources suggested that the move to block Indian flight operators from the EU carbon tax regime would require a clear political mandate. It would have to be placed before the Cabinet for its nod by this year.

The government is also keen to work with other partners to take the battle against the EU to the dispute settlement mechanism under the Chicago Convention on international aviation. It would seek allies in the battle, though it is also cautious that the voting rights of all parties to the dispute are suspended until the issue is resolved.

This, experts suggested, could be circumvented by finding an ally nation that would not face any economical loss in taking on EU under the convention with other key countries supporting it.
source: Times of India