Editorial – April 2023
Many international agencies including IMF have predicted that Indian economy will grow by around 6% in 2023-24. This growth rate beats all the major economies such as the US, China, Japan, Germany etc. If this has to happen, the infrastructure development has to continue with the same speed which will automatically consume huge volumes of metals. Thus if the Indian economy is to grow decently, the metallurgical sector has to perform well.
Today, exports is one of the key factors in the growth of Indian metals sector and around 30% of India’s metal & metal products exports are going in the EU. Recently the EU has proposed ‘Carbon Border Adjustment Mechanism’ (CBAM) a tariff on the import of carbon intensive goods such as steel, aluminium etc. This is likely to impact the India’s metals exports to the Europe. The exporting companies will have to start collecting and reporting the carbon data. The CBAM levy is expected to come in gradually in a phased manner by 2026 and will be linked with EU carbon market prices. This will clearly act as a trade barrier for Indian metals exports to EU in coming years. As per the Indian metal business houses, this is not as per the Paris agreement on carbon emission where it was agreed that the developed countries will bear a major share in reduction of global carbon footprint. It is also not compliant with WTO guidelines. India has committed itself to become carbon neutral by 2070.
Such a move by the EU will put a lot of pressure on not only Indian metal producers to reduce the carbon footprint but also on Indian government to supply clean energy to the producers, otherwise they will be at a clear disadvantage with respect to their EU counterparts where green grids are available. Also it is an uphill task for Indian producers to collect, monitor and report the carbon data as they have to set up new systems and processes. We understand the Indian government has taken the matter to WTO and asked to intervene.
In today’s times, international relations and geopolitics have become very complicated. On one side it is guided by self interests and on the other side, it is also based on putting hurdles in the growth of competing countries, the ones which are not in our lobby. This also includes taking positions at international forums which will suit our friends/lobby members and will hurt the others. Such behaviour has become the norm of today’s geopolitics. This directly affects the international trade and metallurgical industry is no exception to it.
The recent move by the EU to introduce CBAM with respect to the carbon intensive imports may look as a step towards making the planet green, free from carbon emissions, but is it really so? Does it have any bearing with India’s position with respect to Ukraine Russia war which now has practically become Europe Russia war? Or is it a move to suppress India’s growing economic power? I am really confused. What do you think?