India-EU FTA targets CBAM compliance support for aluminium exporters and SMEs

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India has said that its free trade agreement (FTA) with the European Union includes a dedicated roadmap to address concerns over the EU's Carbon Border Adjustment Mechanism (CBAM), with officials expressing confidence that small and medium-sized enterprises (SMEs) will not face significant difficulties in complying with the new rules.

Additional Secretary in the Department of Commerce Darpan Jain said the CBAM was a major focus during the India-EU trade negotiations, resulting in a separate annexure within the agreement that outlines measures to deal with the mechanism. He said, "The first pillar is that, in case of flexibility in future, that will be available to India. So there is an obligation in that."

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Jain explained another priority, that is helping Indian SMEs meet CBAM compliance requirements. According to Jain, exporters have raised concerns over carbon verification, calculating the embedded carbon content of products and ensuring that verification agencies are recognised by EU authorities.

He stated, “There are separate provisions, and we also have a provision in which we can engage with EU authorities on taking into account the carbon price, which is paid in India.”  

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India is currently developing its own domestic carbon pricing mechanism, and discussions will focus on whether carbon costs paid in India can be offset against CBAM payments in Europe.

Speaking at the Indo-German Chamber of Commerce (IGCC) Industry Dialogue 2026, Jain said the government is working on the CBAM roadmap and remains optimistic that Indian SMEs will be able to comply with the new requirements.

The European Union's Carbon Border Adjustment Mechanism came into effect on January 1. Under the scheme, the EU applies a carbon levy on imports of carbon-intensive products, including aluminium, steel, fertilisers and cement, based on emissions generated during production. At present, the mechanism covers aluminium and steel products.

Jain also said the Commerce Ministry is preparing an extensive nationwide outreach programme to help businesses understand the India-EU trade agreement. He stated, "We want to go to all the districts and conduct outreach programmes there and tell industry about what is there in the FTA, how they can use it, how they can explore opportunities under that,” and develop digital tools to help businesses, particularly SMEs.

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India and the European Union concluded negotiations for the agreement earlier this year. The deal is expected to be signed later in 2026 and could come into force next year.

Jain said the agreement would create significant commercial opportunities for both sides. India and the EU together account for around one-third of global trade, valued at approximately USD 33 trillion. He also noted that Germany's automotive industry, with exports of about USD 286 billion, stands to benefit from improved access to the Indian market under the agreement.