Trade Liberalisation in

Environmental Goods

Experiences from India

Format of presentation

An overview of Indian environmental industry

Autonomous liberalization

Challenges and concerns

Environmentally preferable products

Development of Indian environmental industry

Growing awareness Health issues related to pollution and increased judicial activism Industry realizes that being environmentally responsible is being economically sound.

Improved enforcement of legislation 1974: Water (Pollution and Control of Pollution) Act 1974: Central Pollution Control Board 1985: Ministry of Environment and Forests 1986: Environment Protection Act

Composition of Indian environmental industry

Equipment Suppliers – Specialized System Suppliers Chemical Suppliers Engineering, Procurement and Construction

Contractors/Lump-sum turnkey Contractors Consultants Build Own Operate and Transfer (BOOT) and

Build Own Operate (BOO) Operators Analytical Services – Laboratories etc

Characteristics of Indian environmental industry

Industry dominated by small and medium size units (Large- 100 no’s, Medium - 250 )

Market dominated by end of the pipe treatment plants

Lack of resources: Deficient in capital, R&D, specialized treatment technologies for complex/ special pollutants

Traditional strength (conventional air pollution equipment / waste water management/ environmental consulting/ solar cells and hydraulic turbines)

Characteristics of Indian environmental industry…

Presence of foreign companies (Licensing,

Joint ventures, and wholly owned subsidiaries)

Foreign collaboration (US - 33 %, Germany 14 %,

UK 13 %, Canada 7 %)

Important Trading Partners (Import): USA, Germany, Japan, UK, Canada, Australia

Important Trading Partners (Export): Middle East, Vietnam, Indonesia, and other countries in South East Asia

The Market (Estimates in US $millions)

2000 2001 2002 (estimated)

Total market Size

3294 3788 4166

Total Local Production

2061 2272 2499

Total Imports

1233 1516 1667

Imports from the U.S.

431 530 583

Autonomous Liberalisation

FDI with 100% foreign equity allowed through automatic route

Preferential tariffs for pollution control equipments Duty exemptions for equipments for R&D projects and

public funded research institutions Preferential tariffs for renewable energy equipments APEC list:

Average Bound rates- 25% to 40% (35%)

Average Applied rates-10 % to 25% (22%)

Challenges and Concerns

Availability of funds/investment

Availability of technology and its diffusion

Absence of strict enforcement of quality parameters for imported capital equipments

Use for environmental purposes: Electricity meters, liquid flow meters, heat exchangers, conveyors

and centrifugal pumps are general industrial equipments

Tackling tariff anomalies i.e. a structure where duties on inputs would be higher than on finished goods

India’s Trade (Goods in APEC list) (million US$)

Categories of goods India’s trade in all the items mentioned in APEC list

Imports Exports

Air pollution control 135.71 73.25

Water pollution control 237.45 155.83

Solid/ hazardous waste management 137.32 56.14

Remediation/ clean-up of soil and water 0.89 0.1

Monitoring/ analysis and assessment 588.00 108.39

Noise/ vibration abatement 39.87 37.57

Potable water treatment 62.54 37.57

Other recycling systems 25.52 3.56

Renewable energy plant 32.96 41.41

Heat/ energy management 8.09 6.62

Challenges and Concerns…

Export opportunities for Indian companies

Trade data in environmental goods APEC list -Imports US$ 1340 million -Exports US$ 610 million

Technology licensing agreements with market restriction clauses (Indian companies have an edge in pricing structure )

Lack of proper marketing and distribution network

Applied tariff rates in developed countries are already at a nuisance level.

Inherently environmentally

friendly goods

Environmentally friendly Natural products Non agricultural products Superior to other products

Jute CoirRattan and bambooNatural and vegetable dyes

Trend in exports from India (million US$)

Year Jute Coir Bamboo/Rattan

Cotton handloom

1998/99 126.57 64.48 - 455.98

1999/00 119.96 65.88 3.91 456.94

2000/01 150.21 66.19 3.99 465.68

2001/02 133.33 - 4.16 432.97

The way forward

Balanced approach needed to ensure flow of trade gains, technology and development of local industries.

General industrial items should not get place in a possible list of environmental goods.

Transfer of technology at affordable terms. The Working Group on Trade and Technology Transfer could look into the relationship between trade in environmental goods and the transfer of clean technology.

Less than full reciprocity for developing countries