While everything was going on smoothly and commerce minister Piyush Goyal and his counterpart Dan Tehan had last month set a 30-day deadline for their officials to clinch the early harvest scheme — a precursor to a full-fledged comprehensive economic cooperation agreement — coal has caused a last-minute delay.
It is the top item in Australia’s export basket to India, with coking coal accounting for a bulk of it. Australia is the biggest source of coking coal shipments into India.
Although the government has reduced tariffs over the last few years, duty-free coal imports will leave a significant hole in India’s tax kitty, which is a concern with the revenue department.
Besides, domestic production of coal may also be impacted, hitting the Narendra Modi government’s Atmanirbhar Bharat programme as mining is seen to be crucial to job creation.
In addition, there are worries over a few other products but the key concern is coal. In fact, sections within the government have been wondering about the need to offer a free passage to coal, which accounted for three-fourths of India’s imports from Australia (see graphic).
Government sources indicated that it may be possible to finalise the interim agreement by month-end. A prolonged delay in a deal will, however, put the trade agreement back in the cold storage as Australia is headed for elections and the current government was seeing the CECA as a way to help reduce dependence on China, with which it has strained relations for the last few years. The India-Australia trade agreement has been under negotiation for over a decade now and received a massive push in recent months.
Australia was seen to be willing to offer zero-duty access to nearly 100% Indian goods in a phased manner and also offer some visa concessions for students and professionals, although the Indian authorities continued to have concerns over trade barriers, in the form of standards. In addition, Australia was willing to accommodate India’s concerns on agriculture and dairy products, where it is very competitive.