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  • Writer's pictureAayushi Sharma

Australia provides zero duty coal import to India

As the new India- Australia Free Trade Agreement gets implemented, India obtains a zero duty access to coking coal imports from Australia

India's Union Minister for Coal and Mines, Mr. Pralhad Joshi in conversation with Australian coal mining companies

The Australia-India Free Trade Agreement (FTA) coming into effect was the last major development in Australia-India bilateral relations. Ratified by the Australian parliament towards the end of 2022, the agreement came into force by the December 29, 2022. This agreement is largely regarded as a pathbreaking step for the rapidly strengthening relationship between India and Australia. It is important to understand why and how this agreement came to occupy such a central place in the bilateral relations between these two countries.

Access to coal

It is significant to look at the India-Australia Free Trade Agreement in this regard. A lot has been said and done about Australia’s potential for becoming a hub of critical mineral mining and how it can fulfil India’s growing demands in the sector. Critical minerals like lithium may become a central need for the future but the energy resource at the centre of our sustenance today, is still coal. This is also the reason as to why this particular agreement deserves to be applauded even more.

Coal, accounts for about 55 per cent of India’s energy needs. Given the increasing energy requirement, rising population as well as lack of strong renewable energy technology at this point, this number is likely to rise even further in the near future. Australia has consistently remained one of the major importers of coal to India and this has also formed an important aspect of Australia-India economic exchange. Prior to the recently enforced FTA, there used to be a 2.5 per cent import duty on the imports of coking coal from Australia to India. This import duty has been exempted, making the cost of importing free. Australia was already one of the largest contributors of coal to India but will now be giving increased access to coking coal resources to be imported to India.

Why does access to coal matter?

On the face of it, it is very clear that coal occupies a central place in India’s energy infrastructure, but Australia’s role is also important in the picture. This agreement would make Australia the largest partner to India when it comes to coking coal imports and this also goes on to show that this FTA was very carefully crafted. It was engineered to consider the needs of both the countries and to fulfil them based on the existing capacities of both the countries too. This is the reason coal has become a symbol for such elevated cooperation.

As India is still in the process of transitioning to completely renewable sources of energy, a lot of research and development resources need to be diverted to this goal for developing the required technological know-how. The country will continue to be massively dependent on coal resources till this goal is achieved. Australia’s agreement to provide duty free access to coal for India proves that the country is ready to support India towards this journey of transitioning. It is also important to consider here that India and Australia have been together exploring the ideas of cooperation in development of technology for transitioning to renewable energy and also towards using critical minerals as a stepping stone towards this transition.

This development is key for India for two reasons- firstly, the importance of coal for India’s energy sector cannot be overstated, the resource forms the backbone of the energy development of this country; secondly, this bodes well for the greater longer term economic partnership between India and Australia.

One might think that this FTA is only significant for India but that is far away from the reality. Australia provides zero duty access to 100 per cent of its imports to India as a part of this agreement. This is not just significant for India but for Australia as well because this is the first time the country has entered into such an agreement with another country. Not only symbolically, but this agreement would also have tangible benefits to Australia as it provides access to Indian markets for Australian businesses for goods and services. It is safe to say that this agreement is an important milestone in the path that these two countries are together carving towards a holistic cooperation.

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