India-UK FTA: 85% of Indian Steel Exports Shielded from UK Curbs

India and the United Kingdom have reached a landmark consensus regarding steel trade, clearing a major diplomatic hurdle ahead of the operationalisation of their Comprehensive Economic and Trade Agreement (CETA). This breakthrough ensures that the vast majority of Indian steel shipments will remain unaffected by Britain's upcoming restrictive safeguard measures.

Breakthrough in Bilateral Steel Trade Negotiations

The resolution of the steel safeguard issue marks a significant milestone for the India-UK CETA, which is set to become operational on July 15. Previously, the UK's proposed steel safeguard regime was a primary sticking point in finalizing the trade pact signed on July 24, 2025.

According to an official statement, 85% of India's steel exports to the UK will now fall outside the scope of these new measures. To protect Indian commercial interests, the two nations have agreed upon a strategic mix of Country-Specific Quotas (CSQ), residual quotas, and access under the Authorised Use Scheme (AUS). These mechanisms are designed to minimize market disruptions and maintain a balanced trading environment for Indian exporters.

Understanding the UK’s New Steel Safeguard Regime

The negotiation comes at a critical time, as the UK is tightening its import rules. Under the new British regime, which is scheduled to take effect from July 1, 2026, tariff-free steel imports will be capped. The overall quota volumes are set to be reduced by 60% compared to the existing safeguard mechanism.

Any steel imports that exceed these established quotas will be subject to a steep 50% tariff. These measures specifically target steel products that are currently capable of being manufactured within the UK. This revised framework represents a significant tightening of limits compared to the previous safeguard regime, making the recent consensus between Minister Piyush Goyal and UK Secretary of State Peter Kyle essential for Indian industry stability.

The Looming Challenge: Carbon Border Taxes

While the steel quota issue has been resolved, a new challenge looms on the horizon: the UK's Import Carbon Pricing Mechanism, similar to the European Union's Carbon Border Adjustment Mechanism (CBAM). Scheduled to come into force in 2027, this carbon tax could pose a significant threat to Indian heavy industries.

The economic think tank GTRI estimates that Indian exports worth approximately USD 775 million could be impacted by this mechanism. The tax is expected to target sectors including iron, steel, aluminium, fertiliser, cement, hydrogen, ceramics, and glass. Once free allowances under the Emissions Trading Scheme (ETS) are fully phased out, the tax could range between 14% and 24% of the import value. Given that India's exports of iron, steel, and related products to the UK reached USD 893.4 million in 2025-26, navigating these carbon regulations will be the next major priority for Indian trade negotiators.

Key Takeaways