Smaller Indian steel and engineering manufacturers say the EU Carbon Border Adjustment Mechanism (CBAM) is creating financial and operational pressure as emissions reporting becomes part of export contracts. Companies report difficulty obtaining upstream emissions information, which they link to higher verification spending and increased caution among some European buyers. The challenges were described in reports dated 30 October 2026.
Industry representatives say the immediate barrier is often not the carbon charge itself, but unreliable emissions information from steel suppliers. Smaller manufacturers need upstream records to calculate the carbon footprint of products sold into European markets. The issue affects sectors including foundry products, forged components, flanges, tubes, fasteners and machinery parts.
Many of those producers rely on steel purchased from larger domestic manufacturers. Company-level accounts were cited as examples of difficulties in Indian industrial supply chains as CBAM becomes a factor in European importer decisions. The reported experiences also extend to situations where finished goods may not yet be covered by the mechanism.
Upstream steel emissions data limits product footprint calculations
Arun Kumar Garodia, managing director of Kolkata-based Corona Steel and former chairman of the Engineering Export Promotion Council of India, identified access to upstream carbon-footprint information as a major challenge. Smaller processors often cannot obtain verified emissions records from primary and secondary steel manufacturers supplying their raw materials. Without those records, they may struggle to attribute emissions to purchased steel and their own subsequent manufacturing steps.
For European customers importing products covered by CBAM, incomplete emissions information can shift calculations toward prescribed default values rather than verified actual emissions. The choice between default values and verified figures can materially affect carbon-cost calculations for importers. Industry sources also said European customers may request emissions data voluntarily or ahead of proposed downstream expansion.
Such commercial requests were described as distinct from existing statutory CBAM obligations. The same information gap can therefore arise even when finished goods are not currently within the mechanism’s coverage. In practice, exporters said they face uncertainty when customer expectations extend beyond current legal requirements.
Monitoring and verification spending adds compliance burden
Preparing facilities for emissions reporting creates additional financial burdens for smaller manufacturers, according to estimates cited in the reporting. Trade researcher Ajay Srivastava, founder of the Global Trade Research Initiative, said establishing factory-level monitoring and reporting capabilities can require initial expenditure of about €18,900 or more depending on installation and production processes.
Separate industry estimates place recurring annual expenditure on monitoring, reporting, software, administration and verification-related activities at roughly €14,100–€18,900 for some smaller enterprises. The figures were described as illustrative rather than standard costs for every Indian exporter. They exclude equipment modernisation and cleaner-production investments and are separate from any certificate liabilities incurred by European importers.
For companies operating with narrow margins, compliance preparation costs combined with production upgrades and potential customer price adjustments could affect profitability and working-capital needs. The burden was also described as more difficult for manufacturers sourcing materials from multiple upstream suppliers where emissions information may be inconsistent or unavailable across purchases.
European buyers adjust orders amid supplier compliance uncertainty
Commercial effects have been reported in specific supplier relationships. Digvijay Singh Chauhan, managing partner of Noida-based machinery-parts exporter UNISPARES India, said some European customers reduced orders or reconsidered purchasing arrangements amid additional compliance uncertainty.
A steel manufacturer based in Jamshedpur reported weaker enquiries from smaller European buyers. The company produces approximately 40,000 tonnes annually and exports around 20,000 tonnes, primarily pipes, tubes and flanges. Its management said some smaller customers withdrew from purchasing discussions while broader consequences remained difficult to quantify.
The accounts were presented as indications of uncertainty in particular commercial relationships rather than proof of a general decline in Indian steel exports to Europe. Factors cited as influencing purchasing decisions included industrial demand levels, competing suppliers, European trade safeguards, conventional tariffs, freight costs and changing inventory requirements.
Export volumes rise overall while EU-specific impact remains unclear
Government data cited in the industry reporting showed finished steel exports rising 31.3% year on year in August 2026 to about 694,000 tonnes. The figure covers all export destinations rather than isolating shipments to the EU. As a result, it does not establish whether exports to Europe increased specifically.
The reporting also highlighted estimates that could extend data requests beyond direct CBAM coverage for all affected firms. Deloitte India estimated that around 25,000–30,000 MSMEs across steel, foundry, forging, fasteners and aluminium supply chains could face direct or indirect emissions-data requirements.
The estimate was described as not an official count of businesses legally subject to CBAM. Actual coverage depends on customs classification of exported products, obligations placed on European importers and the scope of any future expansion to downstream goods. Industry representatives said smaller suppliers often lack dedicated emissions-accounting teams and may have limited resources for independent technical assistance.
Verification rules depend on EU accreditation; certification support announced
The reporting identified verification capacity constraints for exporters seeking to use actual emissions figures in CBAM declarations. It said the European Commission requires emissions data used for CBAM declarations to be independently verified under the applicable EU accreditation framework.
An Indian verification organisation may develop technical expertise and provide domestic pre-verification services; however local accreditation alone does not establish eligibility to issue statutory CBAM verification reports. This distinction was described as relevant as New Delhi considers development of domestic verification capacity while expanding financial support for exporters pursuing international certification.
On 23 October, the Indian government announced additional certification-support ambitions including proposals to cover full eligible certification costs for micro and small enterprises. Financial assistance was described as helping companies meet certification expenditure without automatically reducing embedded emissions or removing certificate obligations for EU importers.
CBAM factors enter industrial finance assessments across regions
The reporting said CBAM introduces additional considerations into manufacturing credit assessments by Indian banks and industrial investors. Potential exposure extends beyond direct production expenses to include compliance preparation costs, availability of supplier data and recurring verification expenses.
It also includes changes to European customer contracts and the possibility that high calculated emissions could weaken export competitiveness. Longer-term investment requirements may increase where manufacturers need cleaner equipment, improved energy efficiency or lower-emission raw materials.
The same accounts referenced exporters in Serbia, Montenegro and other Western Balkan countries as facing similar traceability expectations from European customers before procurement conditions are set comprehensively. Suppliers able to document material origins alongside installation-level emissions and production processes were described as potentially better positioned than competitors relying on incomplete records.
The reporting framed two connected tasks for India: making emissions accounting affordable for smaller manufacturers and ensuring upstream steel producers provide information usable by European buyers under applicable rules. It linked these issues to whether smaller Indian manufacturers can maintain their position in European industrial supply chains as carbon-border costs become more visible in international contracts.