India-UK FTA: Major Steel Export Hurdle Cleared for Indian Businesses

The long-standing deadlock regarding steel trade under the India-UK Free Trade Agreement has finally been resolved, marking a significant milestone for bilateral commerce. With 85% of Indian steel exports shielded from upcoming British safeguard measures, the agreement paves the way for a smoother trade relationship between the two nations.

Breakthrough in Steel Safeguard Negotiations

A major roadblock in the implementation of the Comprehensive Economic and Trade Agreement (CETA) has been removed. The UK’s proposed steel safeguard regime, which had emerged as a critical sticking point since the pact was signed on July 24, 2025, has seen a successful resolution. Both nations have reached a landmark consensus to protect and promote bilateral steel trade, ensuring that Indian exporters face minimal market disruption.

The agreement is set to be operationalised from July 15. This breakthrough follows high-level discussions between India's Commerce and Industry Minister Piyush Goyal and UK Secretary of State for Business and Trade Peter Kyle, aimed at balancing commercial interests and maintaining a stable trading environment.

How India Secured Protection for its Exporters

The UK's new regime, scheduled to take effect on July 1, 2026, is significantly more stringent than previous frameworks. The new rules will cap tariff-free steel imports and reduce overall quota volumes by 60% compared to existing safeguard mechanisms. Any imports exceeding these quotas will be hit with a heavy 50% tariff.

Despite these tightening limits, India has successfully negotiated a multi-layered protection strategy. According to official statements, 85% of India's steel exports will remain outside these restrictive measures. This protection has been achieved through a strategic mix of:

Future Challenges: The Shadow of Carbon Taxes

While the steel quota issue has been settled, Indian industry must now prepare for the next wave of regulatory hurdles: the UK's Import Carbon Pricing Mechanism (the UK's version of the Carbon Border Adjustment Mechanism, or CBAM). Set to come into force in 2027, this mechanism will impose carbon taxes on carbon-intensive sectors.

According to the Global Trade Research Initiative (GTRI), Indian exports worth approximately USD 775 million could be impacted by this upcoming tax. The mechanism will initially target sectors including iron, steel, aluminium, fertiliser, hydrogen, ceramics, glass, and cement. Once free allowances under the Emissions Trading Scheme (ETS) are phased out, the tax could range between 14% and 24% of the import value. Given that India's iron and steel exports to the UK stood at USD 893.4 million in 2025-26, addressing carbon footprints will be critical for long-term competitiveness.

Key Takeaways