EUDR and its Implications for India

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The climate crisis, driven in part by deforestation, has become a global concern, with deforestation accounting for 11% of greenhouse gas emissions, second only to fossil fuels. In response, the EU implemented the European Union Deforestation Regulation (EUDR) in June 2023. This regulation, effective from December 2025 for medium and large companies and from June 2026 for smaller enterprises, targets deforestation linked to agricultural expansion. The EU’s goal is to eliminate deforestation from its supply chains, aiming for 32 million metric tonnes of deforestation-free commodities annually.

The major products covered under the EUDR include palm oil, cattle, soy, coffee, cocoa, timber, rubber, and products derived from the listed commodities (such as beef, furniture, or chocolate).

Implementation

The EUDR is to be followed by all companies that operate and trade with the EU. Every company that is involved in harvesting agricultural products, processing them, selling a relevant product, or placing these products on the market has to comply with these regulations. According to these regulations the companies need to certify that the product is deforestation-free and follows the relevant legislations of its country of production.

Companies must submit a due diligence statement that follows a three-step process:

  1. Collection of Information: Provide detailed data about the product, including the geolocation of the land where the commodity was produced.
  2. Risk Assessment: Evaluate risks related to deforestation, Indigenous rights, forest damage, information reliability, product contamination, and broader issues like corruption, human rights violations, and armed conflicts.
  3. Risk Mitigation: Implement measures to reduce risks, such as independent audits, additional documentation, or closer collaboration with suppliers.

Each supply chain must follow due diligence that fits its specific needs. Companies must submit their due diligence statements online to a deforestation registry set up by the European Commission. EU authorities will review the submissions based on factors like product type, supply chain complexity, processing stage, land location, country risk, compliance history, and any signs of evasion. Companies failing to meet requirements will face fines proportional to the environmental damage, as well as confiscation of the product and any revenue gained from it.

Impact On India

 In 2023, the EU was India’s largest trading partner for goods, accounting for 12.2% of India’s total trade. India exports a range of products to the EU valued at USD 75.9 billion as of FY24. India is a major supplier of coffee with over 57% of the Indian coffee, 25% of rubber, and 30-40% of leather is exported to the EU. The exports of all these commodities will be severely affected by the regulations. As per the reports from GTRI (Global Trade Research Initiative), the regulations would hit India’s agriculture exports worth USD 1.3 billion to the EU starting in December 2024.

The implementation of EUDR could affect SMEs as they need to spend huge amounts to implement advanced data management and information-sharing systems to track commodities in great detail. 

India is negotiating a free trade agreement with the EU to address concerns about sustainability measures like CBAM and deforestation. The Indian government must support companies in adapting to these regulations by investing in infrastructure and research on sustainable practices. Industry collaboration on data-sharing platforms can also help companies comply with the EUDR, enhance their reputation, attract eco-conscious customers, and improve supply chain efficiency, ultimately reducing costs.These new regulations threaten to undermine India’s position as a major supplier to the EU market, especially in sectors like coffee, where more than half of India’s production is sent to the EU, as well as in rubber and leather exports.

Such disruptions would not only impact India’s agricultural sector but could also affect the broader economy by reducing export revenues, causing supply chain bottlenecks, and undermining the livelihoods of millions of farmers and workers reliant on these industries. Therefore, while India continues to benefit from strong trade relations with the EU, the evolving regulatory landscape demands proactive engagement and adaptation strategies to mitigate adverse effects and ensure sustained access to this vital market.

source- oritain, europa.eu,

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