Steel Sector in the Crosshairs: India Criticizes EU’s Carbon Tariff Ahead of Crucial FTA Talks

A senior official from India’s Ministry of Steel has publicly criticized the European Union’s Carbon Border Adjustment Mechanism (CBAM), calling it “against the spirit of the Free Trade Agreement (FTA)” currently under negotiation between India and the EU. The remarks come amid growing concern that CBAM could disproportionately impact India’s steel exports, especially from small and medium-sized enterprises (SMEs).

 

The official stated that CBAM, which imposes a carbon levy on imports of emission-intensive goods like steel, undermines the principles of equitable trade and could erode the competitiveness of Indian producers in the European market.

 

What Is CBAM?

CBAM is the EU’s climate policy tool designed to level the playing field by charging carbon fees on imports from countries with less stringent emission norms. It targets sectors such as steel, cement, aluminium, fertilisers, electricity, and hydrogen, with full implementation slated for January 2026.

 

Impact on India’s Steel Sector

India’s steel industry, which relies heavily on coal-based production, is particularly vulnerable. The blast furnace-basic oxygen furnace (BF-BOF) route dominates, while cleaner technologies like electric arc furnaces (EAFs) remain underutilized.

 

Diplomatic Response

India is actively engaging with the EU to seek exemptions, develop carbon pricing mechanisms, and protect MSMEs from disproportionate burdens. Commerce Minister Piyush Goyal has raised the issue at the WTO and emphasized the need for fair treatment of Indian exporters.

 

What’s Next?

With the India-EU FTA negotiations entering their eighth round, CBAM remains a contentious issue. India is pushing for technology transfers, capacity-building, and flexible compliance pathways to ensure that climate goals do not come at the cost of trade equity.

 

Sources: ICRA, Times of India, The Hindu BusinessLine, ORF, PIB