The government has threatened to review the benefits it provides to European airlines as

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it mounted its opposition to the EU move to impose carbon tax on Indian carriers operating through Europe, a source said.

Under a Horizontal Aviation Agreement between India and the 27-nation bloc EU, New Delhi allows any European airline to operate flights between India and any European Union member state.

The tax, which airlines flying into or out of EU airports have to pay to cover carbon dioxide emission during their flights over the European skies, has come into effect from January 1. The move was strongly criticised by several countries including the US, China, Brazil, Russia, Japan and India.

"Efforts are going on to resolve the issue... But if they do not exempt India from this, we may review our horizontal agreements with them and put some restrictions," the source said, while speaking on the proposed retaliatory measure.

Finance Minister Pranab Mukherjee has also strongly opposed the EU plan at the last G20 meeting.

"India believes that some of the measures like carbon export optimisation tax...Violate the principles of the Convention (United Nations Framework Convention on Climate Change) as their incidence falls entirely on developing countries and these cannot be recognised as a source of new and additional finance for climate change," Mukherjee had said.

The move has not gone down well with the aviation industry, with the global airlines body International Air Transport Association (IATA) strongly opposing it.

UN body International Civil Aviation Organisation (ICAO) Council, of which India is a member, has also criticised the EU plan to charge airlines for carbon emissions.

At its meeting last month, the ICAO described it as discriminatory and violative of global laws. The ICAO members are again meeting here in mid-February to discuss the issue.

"All the members will again review the situation in the meeting and finalise the way of action," the source said, adding that the EU move would also increase transaction cost for Indian exporters.

India will also raise the matter during the India-EU Summit here on February 10.

The ICAO meet here in September last year, attended by about 30 countries, had unanimously adopted the Delhi Declaration opposing the EU plan to include all flights by non-EU carriers to and from an airport in the territory of an EU Member State in its emissions trading system.

The Declaration had said the move was "inconsistent with applicable international law" and had urged the EU to refrain from imposing the tax.