Indian SMEs in the steel sector face difficulties in complying with CBAM

Small and medium-sized enterprises in India operating in the steel sector will find it difficult to comply with the requirements of the European CBAM. This was discussed during a thematic webinar organized by the Federation of Indian Chambers of Commerce and Industry (FICCI), according to Energy Watch.

Despite the difficulties, the country’s large steel producers are accelerating their investments in decarbonization. At the same time, the SME sector faces difficulties in implementing the requirements of the European CBAM — monitoring, reporting, and verification — due to limited resources and technical capabilities. This trend was noted by Sanjay Singh, Director of Strategy and External Relations at Jindal Steel and former Minister of Steel of India.

According to him, the steel sector is an industry where it is difficult to overcome emissions because the technologies for complete decarbonization do not exist, or if they do, they are not implemented or economically viable.

In recent years, Indian steelmakers have exported 5-6 million tons of products per year to the global market, with 25% of this volume destined for Europe.

Vinod Gupta, senior member of the FICCI Steel Committee and executive commercial director of SAIL, stressed that CBAM could add 20% to 35% to the tax burden on Indian steel exports to the EU. The intensity of emissions in the country’s metallurgy industry is currently 2.5 tons of CO2 equivalent per ton of steel, compared to the global average of 1.91 tons.

Indian experts are calling for certain realities to be taken into account. In particular, Gupta noted that it should be recognized that a significant portion of emissions have historically been generated by countries that are now classified as developed. In his opinion, in its current form, CBAM is likely to turn into unfair trade regulation directed against developing countries.

Industry representatives also warned that carbon pricing mechanisms or corresponding taxes are becoming the norm around the world. For example, the UK is preparing to introduce its own CBAM in 2027, and similar schemes are being considered in other countries.

The Indian government has developed tools to support the decarbonization of industry. One of them is the Carbon Credit Trading Scheme (CCTS).

As a reminder, in early July this year, the European Commission opened consultations on the cross-border carbon adjustment mechanism. The aim of the event is to gather the views of stakeholders on the development of policies for the potential extension of the mechanism’s scope, anti-circumvention measures, and rules for the electricity sector.