The CBAM poses significant challenges for Indian SMEs

The European Carbon Border Adjustment Mechanism (CBAM) poses a serious challenge for Indian small and medium-sized enterprises (SMEs), prompting experts to call for urgent government support. This was reported by ANI.

As R. R. Rashmi, a distinguished research fellow at the The Energy and Resources Institute (TERI), noted on the sidelines of an industry conference, large industrial enterprises have a certain degree of technical resilience, whilst smaller ones lack both the financial capacity and the reporting systems required by European regulations.

According to the expert, major sectors such as ferrous metallurgy and the aluminium sector possess certain financial and technical capabilities, although they cannot be said to be fully prepared given the additional costs involved. It is the situation facing SMEs that is of greatest concern.

He noted that the European carbon tax threatens the export competitiveness of India’s steel and aluminium sectors, requiring urgent structural adjustments to the country’s manufacturing ecosystem.

Rashmi proposes introducing a domestic data collection system to monitor and measure carbon intensity, as well as transforming the existing indirect domestic levies into a full-fledged carbon tax, so that the revenue remains within the country.

The expert also advocated for a mutual recognition arrangement between European verification agencies and India’s Export Inspection Council.

Jatinder Singh, Deputy Secretary-General of the PHDCCI — one of India’s national chambers of commerce and industry — believes that SMEs can overcome audit and reporting challenges by using government-supported monitoring technologies to track their carbon footprint directly at the production site.

He noted that whilst heavy industry firms have set net-zero emissions targets, these do not meet EU benchmarks, which has led to a decline in steel and aluminium exports over the past few months. According to Singh, it is worth shifting focus to other sectors, such as Africa and similar regions, so that local industry, with government support, can capitalise on these opportunities.

Companies are actively seeking alternative supply chains and new markets, the expert stated, adding that this will soon mitigate the initial export shocks for the metallurgical sector.

It should be recalled that at the start of this year, the Ministry of Steel stated that the Indian government would support steel exporters in the face of the CBAM. Approximately two-thirds of the country’s steel exports were destined for Europe.