India-UK FTA: Major Breakthrough as 85% of Steel Exports Avoid UK Curbs

The long-standing deadlock regarding steel trade in the India-UK Free Trade Agreement (FTA) has finally been resolved, marking a significant win for Indian exporters. With the Comprehensive Economic and Trade Agreement (CETA) set to be operationalized on July 15, India has successfully negotiated protections to ensure its metallurgical sector remains competitive in the British market.

A Landmark Consensus on Steel Safeguards

The primary friction point in the bilateral trade pact was the UK's proposed steel safeguard regime, which threatened to restrict Indian shipments. However, recent negotiations have resulted in a landmark consensus that shields 85% of India's outbound steel exports from these upcoming British curbs.

To protect Indian commercial interests, a sophisticated multi-layered mechanism has been established. India's interests are secured through a strategic combination of Country-Specific Quotas (CSQ), residual quotas, and access under the Authorised Use Scheme (AUS). This arrangement aims to minimize market disruptions while ensuring a balanced trading environment for both nations.

Understanding the New British Trade Regime

The negotiations come at a critical time, as the UK plans to implement its revised safeguard regime on July 1, 2026. This new framework represents a significant tightening of trade limits compared to previous mechanisms.

Under the new rules, tariff-free steel imports will be subject to strict caps, with overall quota volumes being slashed by 60% compared to the existing safeguard system. Any imports that exceed these designated quotas will be hit with a heavy 50% tariff. These measures are specifically designed to protect domestic manufacturers in the UK by targeting steel products that can be manufactured locally.

The Looming Shadow of Carbon Taxes (CBAM)

While the steel quota issue has seen a breakthrough, Indian exporters face another significant hurdle: the UK's Import Carbon Pricing Mechanism, similar to the EU's Carbon Border Adjustment Mechanism (CBAM). Scheduled to come into force in 2027, this carbon tax could pose a massive financial challenge to Indian heavy industries.

According to the Global Trade Research Initiative (GTRI), Indian exports worth approximately USD 775 million—spanning iron, steel, aluminium, fertiliser, and cement—could be affected. Once free allowances under the Emissions Trading Scheme (ETS) are phased out, the tax is expected to range between 14% and 24% of the import value. This remains a critical area of concern for Indian policymakers as they continue to navigate the evolving green trade landscape in the UK.

Economic Context of India-UK Steel Trade

The stakes for this negotiation are incredibly high. In the 2025-26 fiscal year, India's exports of iron, steel, and related products to the UK reached a substantial USD 893.4 million. Securing the 85% protection rate is a vital step in safeguarding this massive revenue stream and ensuring that the broader CETA provides the intended economic stimulus for Indian manufacturing.

Key Takeaways