India is poised to ask airlines not to take part in the European Union Emissions Trading Scheme (ETS), a senior official said, in the latest escalation of a row over an EU law requiring all flights in and out of Europe to pay for their carbon emissions.

China in February said its airlines were barred from participating in the European scheme unless they get government approval to do so.

The official, with direct knowledge of talks between the EU and other countries on the issue, told Reuters that India would soon ask local airlines not to share emissions data with the bloc or buy any carbon credits.

If the European Commission retaliates by suspending Indian airlines from flying to Europe, India would make similar moves and consider charging an "unreasonable" amount for flying over India, the official said on Monday.

"We have lots of measures to take if the EU does not go back on its demands. We have the power of the economy; we are not bleeding as they are," the government official said, adding that Europe's position would harm its own economy and airlines.

The government is awaiting formal approval from several ministries to implement the order to airlines, which it expects soon, the official said.

"The questions is, 'Are you (EU) provoking the world into a trade war?" the official said.

Last week, China suspended the purchase of 10 more Airbus jets in response to the EU law.

India does not yet plan to ask airlines to cancel Airbus purchases, but that is a possibility if the dispute escalates, the Indian official said.