Indian exports of farm-based products to the EU may suffer more than many competing countries once the EU’s deforestation-free products regulation (EU-DR) kicks in from December 2024, as India has suffered a significant amount of forest loss in the last two decades, a report by a Delhi-based research body has noted.

The regulation, adopted by the European Union Council on May 16, 2023, restricts exports of items to the bloc that have been produced in land deforested after 2020. It may affect Indian exports to the EU worth $1.3 billion annually, per estimates made by the Global Trade Research Initiative.

Blurry line

“Although the India State of Forest Report (ISFR) 2021, released in January 2023, claimed a small increase in forest cover, the positive picture is because the government doesn’t distinguish between natural forests and plantations when assessing forest cover (which the EU does),” the GTRI’s latest research note on the regulation pointed out.

The note quoted a report from ‘Utility Bidder’ in March 2023, which stated that India lost a significant amount of forest between 1990 and 2020, making it the second-worst country after Brazil in terms of forest loss during 2015-2020.

“Due to this situation, Indian exporters will face challenges as they must prove that their export products come from land that hasn’t been deforested after December 31, 2020. The EU-DR will consider plantation land as deforested land, adding to the difficulties for Indian exporters,” the GTRI note said.

Bilateral talks

The Commerce & Industry Ministry has initiated bilateral talks with the EU to discuss how the matter could be handled so that Indian exporters don’t suffer. It is also exploring alliances at the WTO to challenge the initiative which may not be compliant with multilateral norms.

The GTRI, founded by former Indian Trade Service Officer Ajay Srivastava, had earlier estimated that India’s exports to the EU could go down by $1.3 billion annually once the EU-DR is implemented with items such as coffee, leather hides, skin preparations, oil cake, paper, paperboard and wood furniture taking a hit. The list of items covered by EU-DR is likely to increase in the future.

Moreover, the EU-DR makes exports expensive due to the high compliance cost. “Even exporters of high-quality products must invest in expensive due diligence. They need to prove the integrity of their supply chain through a detailed trace and track system from Indian farms to EU markets. This involves sharing farm and farmer data with the EU,” the note stated.

Compliance procedure

The compliance procedure includes collecting various information such as commodity details, quantity, farmer/supplier names, country of production, and addresses of the land plots where the commodities were produced, it said.

Exporters must also ensure that their produce follows relevant laws in the country of origin, such as those related to land use, labor, and human rights. “Only after meeting all these requirements, can the exporter submit a due diligence statement to the EU-based importer. Export to the EU is allowed only after fulfilling these demands,” the note pointed out adding that it may be unsustainable for small scale producers.

comment COMMENT NOW