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Steel · DecarbonisationIndia's Steel Scrap and EAF Expansion: The Economics of Secondary Steelmaking Under CCTS and CBAM
India's electric arc furnace route operating on the national grid emits approximately 1.2 to 1.4 tCO₂ per tonne of steel, compared to 2.2 to 2.5 tCO₂ per tonne for the traditional blast furnace basic oxygen furnace route. An EAF running on roughly 50 percent renewable electricity, like Tata Steel's newly inaugurated Ludhiana facility, achieves below 0.3 tCO₂ per tonne. This places it at the top tier of India's gazette-notified green steel taxonomy and generates Carbon Credit Certificates under CCTS at a rate that materially offsets initial capital expenditure. Recently, India's total scrap consumption reached 41 million tonnes annually, significantly outpacing the domestic generation of approximately 32 million tonnes. With the current 9 million tonne import gap projected to widen to between 20 and 30 million tonnes by 2030 as EAF capacity scales, the critical question is no longer whether to shift toward scrap-electric steel. CCTS and CBAM have already answered that. The urgent question is how fast domestic scrap mobilization can close the supply gap that will otherwise force manufacturers to rely on expensive imports.
Key Takeaways
India produced 151.14 million tonnes of crude steel in FY2025, solidifying its position as the world's second-largest producer. Current steel capacity stands at 200.33 Mtpa, with an aggressive target to reach 300 Mtpa by FY2030. Of the installed capacity, approximately 43 Mtpa is EAF-based, operating alongside 88.5 Mtpa of BF-BOF and 74 Mtpa of induction arc furnace (IAF) operations. The EAF route accounted for roughly 23 percent of India's crude steel output in FY2025. India consumed around 41 million tonnes of ferrous scrap annually, while generating only 32 million tonnes domestically. This creates a structural import requirement of around 9 million tonnes that is set to widen sharply as EAF capacity continues to grow.
On March 20, 2026, Tata Steel inaugurated India's first scrap-based greenfield EAF at Hi-Tech Valley in Ludhiana, Punjab. Built with an investment of roughly Rs 3,200 crore, the facility boasts a capacity of 0.75 million tonnes per annum, utilizes 100 percent steel scrap, and is designed to operate with roughly 50 percent renewable energy. The target CO₂ emissions sit below 0.3 tCO₂ per tonne of steel, placing it solidly within the 5-star category of India's gazette-notified green steel taxonomy. The plant primarily manufactures Tata Tiscon construction rebar for the domestic market, aligning perfectly with Tata Steel's stated net-zero target of 2045.
The combined financial incentive to shift from BF-BOF to scrap-based EAFs utilizing renewable electricity is now massive thanks to CCTS and CBAM. Under CCTS, producing a tonne of steel at 0.3 tCO₂ instead of the baseline 2.36 tCO₂ generates a surplus of approximately 2.06 tCO₂e per tonne, awarding the operator 2.06 CCCs. With an expected CCC price between Rs 600 and Rs 1,000 per tCO₂e, a 1 Mtpa EAF plant operating at this efficiency generates Rs 124 crore to Rs 206 crore per year in pure CCC revenue. Under CBAM, an EAF-RE plant at 0.3 tCO₂/t pays roughly €19.50 per tonne of EU-exported steel in certificates, compared to €162.50 for a BF-BOF plant at 2.5 tCO₂/t. This creates a decisive differential of roughly €143 per tonne, translating to around Rs 12,900 to Rs 13,500 per tonne at current exchange rates.
The Vehicle Scrappage Policy, launched in 2021, acts as the most vital near-term lever for increasing domestic scrap supply. India possesses approximately 12 million vehicles eligible for scrappage, including 4.5 million medium and heavy commercial vehicles. However, from August 2022 to July 2025, only about 350,500 vehicles were formally scrapped, falling significantly below the government's target of 500,000 per year by 2026. Full implementation of this policy could yield roughly 9 to 12 million tonnes of additional ferrous scrap annually, almost entirely eliminating the current import requirement. While the Steel Scrap Recycling Policy of 2019 provides excellent quality and processing standards for formal aggregation, its implementation remains uneven across the massive informal sector that currently dominates scrap collection.
JSW Steel is actively developing a scrap-based EAF greenfield plant in Kadapa, Andhra Pradesh, targeting Phase 1 commercial production by January 2029. The plant is designed to launch at 1 Mtpa and eventually expand to 3 Mtpa while operating entirely on green energy. Separately, JSW Green Steel Limited, carved out of the Salav unit in Maharashtra, is developing 4 Mtpa of green steel capacity in carefully managed phases. Additionally, the JSW Vijayanagar plant, which already houses EAF capacity within its integrated complex, is conducting green hydrogen trials at a 3,800 tonne per year pilot scale, powered completely by 25 MW of renewable energy as of October 2025.
The emission gap: How the two routes compare in India's context
The decarbonisation case for EAF is structural, not marginal. India's current BF-BOF fleet operates at a weighted average GEI of approximately 2.36 tCO₂ per tonne, which serves as the gazette-notified CCTS sector baseline under the GHG Emission Intensity Target Rules. Some of the older integrated plants emit as much as 3.83 tCO₂ per tonne, burdened by high-ash coal and outdated burden management systems. Given that the global BF-BOF average is roughly 1.99 tCO₂ per tonne, it is clear that India's fleet sits above the global benchmark. This happens principally because the nation relies heavily on high-ash imported coking coal and its industrial profile hasn't yet benefited from modern operational improvements.
The EAF route effectively breaks this dependence. An EAF operating on India's standard national grid, utilizing a grid emission factor of 0.710 tCO₂/MWh and charged with 100 percent scrap, produces approximately 1.2 to 1.4 tCO₂ per tonne of steel depending on exact electricity intensity and scrap quality. This performance places it comfortably below the CCTS 3-star green steel taxonomy threshold of 2.2 tCO₂/t, delivering steel at a GEI safely within what Phase 2 CCTS targets are likely to demand from the sector. Better yet, as the national grid slowly decarbonises with new renewable energy additions, this emission figure will fall automatically for grid-connected EAFs without requiring any additional plant-level investments.
Introducing direct renewable electricity to the EAF pushes the GEI well below 0.5 tCO₂ per tonne. Approaching 100 percent RE usage, a model the Tata Steel Ludhiana facility is designed to chase, allows the combined Scope 1 and Scope 2 GEI to plummet below 0.3 tCO₂ per tonne. This achievement lands the facility solidly within the elite 5-star green steel taxonomy category.
The financial implication here is direct and incredibly powerful. Under CCTS, every tonne of steel produced below the sector's GEI target earns a tradable CCC. For a new EAF plant operating at 1.3 tCO₂/t against a sector baseline of 2.36 tCO₂/t, the surplus is 1.06 tCO₂e per tonne of output. If that plant runs at 1 Mtpa, it earns 1.06 million CCCs annually. Pricing those at Rs 800/CCC (a comfortable midpoint of current analyst estimates) equates to Rs 84.8 crore per year in pure CCC revenue. Pushing an EAF-RE plant down to 0.3 tCO₂/t inflates that surplus to 2.06 tCO₂e per tonne, generating roughly Rs 164.8 crore annually. These are not hypothetical projections; these figures stem directly from the gazette-notified baselines and the firm CCC pricing frameworks verified by the CERC.
The policy stack: Five instruments pointing in the same direction
Five massive policy instruments are currently working simultaneously to create a highly lucrative incentive environment for EAF-scrap investments in India. For the first time, their combined effect provides unshakeable financial signaling that stretches well beyond mere planning aspirations.
The National Steel Policy 2017 originally targeted shifting 35 to 40 percent of steel output to scrap by 2030. At the lofty 300 Mtpa target, this translates to 105 to 120 Mtpa of scrap-based steel production, representing roughly 2.5 to 3 times the current 41 Mtpa of scrap input. While the NSP did not attach aggressive price signals to this ambition, CCTS and CBAM have successfully filled that void.
The Steel Scrap Recycling Policy 2019 formalized India's scrap processing framework by outlining strict quality standards for collection, dismantling, and processing. Its most notable impact has been the creation of the Registered Vehicle Scrapping Facilities framework and improving the grade consistency of processed scrap. Consistent scrap quality is critical for EAF metallurgical requirements. Without managing tramp element content effectively, EAF heat efficiency plunges and product grade variability spirals out of control.
The Vehicle Scrappage Policy (V-VMP, 2021) acts as the single most consequential near-term lever for domestic scrap supply. The policy targets personal vehicles older than 20 years and commercial vehicles older than 15 years. Incentives include heavy registration fee waivers on new vehicle purchases, state motor vehicle tax refunds ranging from 15 to 25 percent, and potential discounts of up to 5 percent directly from manufacturers. Despite having approximately 12 million eligible vehicles in the country, only about 350,500 were formally scrapped through registered networks between August 2022 and July 2025. This falls drastically short of the target aiming for 500,000 per year by 2026. Because one old BS-4 truck generates pollution equivalent to 14 new BS-6 trucks, successfully implementing the VSP serves as an aggressive air quality initiative, a road safety mandate, and a vital scrap supply engine simultaneously.
CCTS acts as the first robust instrument putting an actual price on GEI for India's steel sector. A BF-BOF plant operating above its gazette target must now aggressively purchase CCCs or face devastating Environmental Compensation penalties set at double the average trading price. Conversely, an EAF operating below the sector baseline naturally earns CCCs to sell on the open market. While the scheme doesn't explicitly mandate a change in production routes, it makes the economics of GEI over-performance financially unignorable for the first time in history.
CBAM (starting January 2026) represents the most powerful external incentive for Indian steel exporters shipping to the EU. CBAM currently targets Scope 1 emissions for steel. Operating against an EU ETS price near €65 per tCO₂e, a BF-BOF plant emitting 2.5 tCO₂/t pays roughly €162.50 per tonne in certificate costs. Meanwhile, an EAF-RE plant sitting at 0.3 tCO₂/t pays only €19.50. This creates an astonishing differential of approximately €143 per tonne, equivalent to Rs 12,900 to Rs 13,500 based on current exchange rates. India safely exported 6.02 million tonnes of finished steel between April and February of FY2025-26, with major shipments reaching Italy, Belgium, and Spain. Even if only 10 percent of total exports target EU markets, this CBAM differential amounts to roughly €86 million annually. A figure of that size easily justifies massive capital investments in lower-emission production routes.
The two routes compared: A full financial picture
(India fleet average position)
(Scrap-based with renewable electricity)
One vital caveat regarding this financial comparison centers around scrap price volatility. EAF steelmaking operates essentially as a price-spread business, relying entirely on the difference between scrap input costs and steel output prices. When scrap prices surge unexpectedly, the attractive economics of EAF begin to narrow compared to BF-BOF's more stable ore-and-coal inputs. For example, when Chinese sponge iron flooded Indian markets in mid-2025, DRI prices collapsed, temporarily shrinking scrap import volumes by 8 to 12 percent despite massive crude steel outputs. However, the structural advantage of the EAF position under CCTS and CBAM is that carbon price pressures completely ignore commodity cycles. As carbon prices firm up and targets tighten significantly starting in 2027, the EAF carbon advantage continues to compound while the BF-BOF carbon liability violently expands, regardless of how scrap prices fluctuate.
The scrap balance: Supply, demand, and the growing import gap
India's domestic scrap generation is growing at an impressive rate but remains hopelessly unable to keep pace with demand growth. The 2026 EY Closing the Loop report actively documents this volatile trajectory.
Domestic scrap generation jumped from 19 million tonnes in FY2022 to 32 million tonnes in FY2025, marking an incredible 68 percent increase in just three years. This strong trajectory is largely fueled by India's rapidly expanding industrial base, surging per-capita vehicle ownership rates, and fast-paced construction demolition cycles. However, it still cannot keep pace with the massive demand generated by relentless EAF capacity additions and higher scrap charging rates inside existing IAF mills. Projecting a 65-million-tonne demand by 2030 against an optimistic domestic supply of only 35 million tonnes guarantees a grueling 20 to 30 million tonne structural import requirement.
An April 2026 white paper published by the Iron and Steel Scrap Council squarely identifies the absence of a digital, traceable scrap ecosystem as the country's primary bottleneck. Punjab already utilizes 85 percent scrap in its EAF charge mixes, while Chennai mills operate near 90 percent. Both regions benefit massively from higher per-capita industrial and vehicle densities that generate localized scrap. The true challenge lies in regions like Odisha, Jharkhand, and Bihar, where formal scrap collection infrastructures are virtually non-existent despite heavy industrial activity. Compounding this issue is the sprawling informal sector, where scrap dealers operate completely outside established processing standards, creating severe grade inconsistencies that actively bottleneck EAF charging rates.
Projects in motion
| Project | Company | Location | Capacity / Details | Status |
|---|---|---|---|---|
| Ludhiana Scrap EAF | Tata Steel | Hi-Tech Valley, Ludhiana, Punjab | 0.75 Mtpa capacity, utilizing 100% scrap and ~50% RE. Focuses on Tata Tiscon rebar with an investment of Rs 3,200 crore. Target CO₂ is <0.3 tCO₂/t. | Inaugurated March 2026 |
| Kadapa EAF Greenfield | JSW Steel | Kadapa, Andhra Pradesh | 1 Mtpa Phase 1 targeting expansion to 3 Mtpa. Operates as a scrap-based facility with hard green energy commitments. | Phase 1 targeted Jan 2029 |
| JSW Green Steel (Salav) | JSW Green Steel Ltd | Salav, Maharashtra | 4 Mtpa of green steel planned over two phases. Features a DRI base integrated with extensive EAF expansions and green hydrogen integration. | Phased capacity rollout |
| Vijayanagar Green H₂ Pilot | JSW Steel | Toranagallu, Karnataka | 3,800 tonnes of green H₂ annually powered by 25 MW of RE power. Integrated fully into an EAF-DRI complex to reduce overall GEI. | Trial runs near-complete |
The Tata Steel Ludhiana facility successfully establishes a highly replicable model, costing roughly Rs 4,267 crore per Mtpa of capacity. While this is significantly above the global benchmark of $200 to $400 million per Mtpa, it directly reflects India's unique context. The project was a massive greenfield endeavor in Punjab's industrial zone, demanding heavy RE integration from inception and bearing the massive cost of establishing a localized scrap aggregation supply chain entirely from scratch. As subsequent projects begin to lean on established local scrap networks and partner with contractors experienced in EAF greenfield builds, the unit capex for Indian projects should rapidly decline toward the lower end of the global spectrum.
India's secondary steel sector actively utilizes two highly distinct electric technologies. EAFs are run by major producers holding an installed capacity of roughly 43 Mtpa, while induction arc furnaces (IAFs) are heavily utilized by MSMEs and smaller producers holding a massive 74 Mtpa of capacity. Together, IAF mills produce a substantial volume of India's construction rebar and structural sections using varied mixes of scrap and DRI. Their emission profiles heavily mirror EAFs whenever scrap content is high. However, most IAF mills sit well below the CCTS 50,000 tonne per year threshold, meaning they are entirely exempt from the obligations and carbon price signals created by CCTS. This creates two distinct realities. First, citing a 23 percent EAF share severely understates the true impact of the electric route in India. Combined, EAF and IAF operations represent nearly 40 percent of total output. Second, the transition of the massive IAF sector toward higher scrap utilization and cleaner electricity operates completely outside the CCTS price signal, relying entirely on raw material cost pressures and evolving green procurement demands. Ultimately, India's overall steel GEI trajectory relies on both segments, yet CCTS only actively pressures the larger EAF mills, leaving the massive IAF ecosystem to organically navigate its own path toward lower emissions.
Frequently Asked Questions
Does EAF-route steel match BF-BOF quality for all Indian applications?
For standard construction steel, like rebar, wire rods, and structural sections, scrap-based EAF steel effortlessly meets all necessary quality requirements. These represent India's highest-volume steel products and serve as the primary output for facilities like Tata Steel's Ludhiana plant. However, for specialized flat products requiring ultra-low residual elements, such as automotive body panels or electrical steel, EAFs face severe metallurgical challenges. Scrap inevitably carries tramp elements like copper, tin, and nickel that simply cannot be removed economically. Consequently, global automotive OEMs continually demand primary steel produced via BF-BOF or H₂-DRI routes for visible body panels and high-strength grades. In India's current market, the largest immediate opportunity for EAF expansion remains strictly within the construction sector where these quality constraints are non-existent.
How does EAF scrap-based steel perform under India's green steel taxonomy?
India's gazette-notified green steel taxonomy, officially established in December 2024, explicitly defines a 3-star rating as sitting below 2.2 tCO₂/t, 4-star as 1.6 to 2.0 tCO₂/t, and 5-star as dipping below 1.6 tCO₂/t. An EAF running purely on the national grid at 1.2 to 1.4 tCO₂/t effortlessly qualifies for a 3-star rating and flirts with a 4-star ranking. Integrating 50 percent renewable electricity drops emissions to roughly 0.4 to 0.6 tCO₂/t, securing a 5-star rating with massive margins to spare. Pushing toward 100 percent RE guarantees emissions sit comfortably below 0.3 tCO₂/t. This taxonomy is heavily expected to influence government procurement norms, naturally creating lucrative price premium markets that actively favor clean EAF operators over outdated BF-BOF setups.
What is the CCTS compliance position of a large EAF plant in India?
Any EAF plant producing over 50,000 tonnes per year becomes an obligated entity under CCTS. Its specific GEI target is determined by the BEE, heavily referencing the plant's FY2023-24 baseline against the gazette-notified sector trajectory. Because most large EAF plants operate at a crisp 1.2 to 1.4 tCO₂/t, their designated targets sit materially above their actual operating GEI. This ensures that modern EAF plants are practically guaranteed to operate in CCC-surplus territory from day one. If a 1 Mtpa EAF plant operates at 1.3 tCO₂/t against a target of 2.2 tCO₂/t, it generates 900,000 CCCs annually. Pricing those at Rs 800/CCC creates Rs 72 crore per year in pure, tradeable revenue, aggressively reducing the effective operational expenditure and rapidly shortening the capital payback period.