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

India has achieved a significant diplomatic and commercial victory in the final stages of the India-UK Comprehensive Economic and Trade Agreement (CETA). By securing exemptions for the vast majority of its steel shipments, India has successfully navigated one of the most contentious hurdles in the bilateral trade pact.

A Landmark Consensus on Steel Trade

The primary friction point in the India-UK trade negotiations had been Britain’s upcoming steel safeguard regime, which threatened to limit Indian market access. However, following high-level discussions between India’s Commerce and Industry Minister Piyush Goyal and UK Secretary of State Peter Kyle, a landmark consensus has been reached.

Under the new agreement, 85% of India's steel exports will remain outside the scope of Britain's restrictive measures. To achieve this, India has secured a strategic mix of protection mechanisms, including Country-Specific Quotas (CSQ), residual quotas, and access through the Authorised Use Scheme (AUS). This arrangement ensures that Indian exporters can maintain a steady flow of products to the UK market without facing prohibitive barriers.

Understanding the New British Safeguard Regime

The negotiations come at a critical time, as the UK prepares to implement a much stricter steel regime effective July 1, 2026. The revised British framework is significantly more aggressive than previous safeguard mechanisms. Key features include:

Despite these tightening limits, the recent breakthrough ensures that Indian interests are protected, minimizing market disruptions and maintaining a balanced trading environment.

The Looming Challenge of Carbon Taxes (CBAM)

While the steel quota hurdle has been cleared, a new challenge looms on the horizon: the UK's Import Carbon Pricing Mechanism. Scheduled to come into force in 2027, this framework mirrors the European Union's Carbon Border Adjustment Mechanism (CBAM).

According to the Global Trade Research Initiative (GTRI), this carbon tax could impact Indian exports worth approximately USD 775 million, specifically targeting sectors like iron, steel, aluminium, fertiliser, and cement. Once free allowances under the UK's Emissions Trading Scheme (ETS) are phased out, the tax could range between 14% and 24% of the import value. Given that India's exports of iron and steel to the UK stood at USD 893.4 million in 2025-26, addressing carbon intensity will be vital for long-term competitiveness.

Key Takeaways