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The trade battle with the European Union over the latter's unilateral decision to impose carbon tax on Indian airlines flying into or via the EU could turn into a full scale war with the Cabinet to soon consider a proposal for counter-measures against EU including reducing the number of flights and breaking existing bilateral agreements.
The proposal, mooted by the civil aviation ministry, seeks the Cabinet's permission to impose various sanctions against EU airlines if the Indian aviation industry is either charged a carbon tax or penalized for not adhering to their taxation regime. The counter-measures recommended in the proposal include cancelling EU flights to India as well as cancelling "horizontal agreements".
The move comes after the government told the Indian aviation sector not to provide data the EU had asked for as part of this new carbon tax regime. The tax itself is to be imposed from next year but the EU has sought data from all flights landing in or transiting via European airspace for calculating the taxes which some estimates suggest could add up to $1.5 billion per annum.
The decision to go for a Cabinet clearance comes after a group of 26 countries including China, US, Russia, Brazil and India jointly agreed to a bouquet of retaliatory measures against EU in February 2012. It was decided that 'like-minded' countries would pick from the menu of options to counter EU's unilateral move if things came to a head.
These measures included reviewing or abrogating bilateral service agreements and open skies agreements with EU countries besides imposing countervailing duties and cess on European fliers.
The battle will reach an ugly peak by the end of the year and if a way out is not found before the actual tax collection regime takes over in EU, it could mean high fares for travelers and the first full scale international climate-trade combat between countries.
India has on various occasions warned EU about the unilateral decision taken outside the UN Framework Convention on Climate Change under which all international climate-related compacts are to be agreed by consensus. Environment minister Jayanthi Natarajan, in a letter to the EU climate change commissioner, had warned that the carbon tax on aviation could cause strain in relations and climate negotiations and followed it up by stating that the EU move was a 'deal breaker' as far as future climate talks stood.
India and developing countries have consistently asked that the responsibility to reduce emissions from aviation too should be along the principle of 'common but differentiated responsibilities' and negotiated under the UN climate convention. With the developed world the producer of aircraft technology, the unilateral move is also seen as a ploy to force purchase of new planes by developing countries every few years as the manufacturers produce more efficient engines and EU ratchets up the threshold of emission standards.
China too has ordered its airlines not to adhere to EU guidelines and requirements on the aviation tax. India sees China and other major emerging countries sticking together on the issue which is likely to be discussed in the forthcoming meeting of BASIC countries - China, Brazil, South Africa and India -- on climate change in Pretoria in South Africa.
