India-UK FTA: Major Steel Trade Breakthrough for Indian Exporters

In a significant diplomatic and commercial victory, India has successfully negotiated protections for its steel exports under the upcoming India-UK Comprehensive Economic and Trade Agreement (CETA). This breakthrough resolves one of the most contentious hurdles in the trade pact, ensuring that the vast majority of Indian steel shipments remain shielded from restrictive British safeguard measures.

Resolving the Steel Safeguard Impasse

The UK's proposed steel safeguard regime had long been a major sticking point in the implementation of the trade pact signed on July 24, 2025. With the UK set to tighten its import limits, there were significant concerns regarding the impact on Indian manufacturers. However, following high-level discussions between Commerce and Industry Minister Piyush Goyal and UK Secretary of State for Business and Trade 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 upcoming restrictive measures. To achieve this, India has secured a strategic mix of protections, including Country-Specific Quotas (CSQ), residual quotas, and access under the Authorised Use Scheme (AUS). This arrangement is designed to minimize market disruptions and maintain a balanced trading environment for Indian exporters.

Understanding the New UK Import Regime

The urgency of this negotiation stemmed from the UK's plan to implement a much stricter safeguard regime starting July 1, 2026. Under the new British framework, tariff-free steel imports will be strictly capped, with overall quota volumes slashed by 60% compared to the existing mechanism. Any imports exceeding these quotas will face a steep 50% tariff.

These measures are specifically designed to protect steel products that can be manufactured within the UK. By securing the 85% exemption, India has effectively insulated its core export volumes from these aggressive protectionist policies, ensuring continued market access despite the UK's tightening domestic industry safeguards.

The Looming Challenge of Carbon Border Taxes

While the steel quota issue has been largely 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 mechanism will impose a carbon tax 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 sectors at highest risk include iron, steel, aluminium, fertiliser, and cement. Once free allowances under the UK's Emissions Trading Scheme (ETS) are fully phased out, the tax could range between 14% and 24% of the import value. For context, India’s exports of iron, steel, and related products to the UK reached USD 893.4 million in the 2025-26 fiscal year, making this a critical area for future trade negotiations.

Key Takeaways