MSMEs Grapple with EU Carbon Policy: Experts Urge Swift Action

Indian MSMEs are under pressure from the EU's Carbon Border Adjustment Mechanism, which could harm their competitiveness. Industry veterans call for state support, technology transfer, and alternative export avenues. Large industries can cope, but smaller units need financial help and other resources to adapt.

Indian Micro, Small, and Medium Enterprises (MSMEs) are currently grappling with major compliance challenges posed by the European Union's Carbon Border Adjustment Mechanism (CBAM). These challenges have spurred industry experts to demand urgent state intervention, technology transfer, and the development of alternative export supply chains.

R. R. Rashmi, a Distinguished Fellow at The Energy and Resources Institute (TERI), highlighted that while large-scale industries may possess some degree of technical resilience, smaller units lack both the financial capacity and reporting frameworks required by stringent European regulations. According to Rashmi, the EU’s carbon tax on imported carbon-intensive goods poses a threat to the export competitiveness of India’s steel and aluminum sectors, necessitating urgent structural changes within the country's manufacturing ecosystem.

The compliance hurdles have further highlighted the unequal carbon accounting framework that disadvantages developing economies. Ravinder Bhan of the Indian Steel Association noted that the CBAM acts as a tax designed to bolster European industries and technology. Without meeting European emission targets, Indian exports face disproportionate taxation, making it a costly endeavor for smaller firms. Meanwhile, Jatinder Singh from PHDCCI suggested that government-backed monitoring technologies are essential for MSMEs to successfully navigate these challenges.