India-UK FTA: Major Win for Indian Steel Exports as Trade Hurdles Clear

India has achieved a significant diplomatic and commercial breakthrough in the ongoing India-UK Free Trade Agreement (FTA) negotiations. By securing protection for 85% of its steel exports, India has successfully navigated one of the most contentious sticking points in the bilateral trade pact.

Resolving the Steel Safeguard Deadlock

The upcoming implementation of the UK's new steel safeguard regime, scheduled for July 1, 2026, posed a major threat to Indian exporters. Under the new British framework, tariff-free steel imports will be strictly capped, with overall quota volumes slashed by 60% compared to the existing safeguard mechanism. Any imports exceeding these quotas would face a heavy 50% tariff.

However, through high-level discussions—including those between Commerce and Industry Minister Piyush Goyal and UK Secretary of State Peter Kyle—a landmark consensus has been reached. India has secured its interests through a strategic combination of Country-Specific Quotas (CSQ), residual quotas, and access under the Authorised Use Scheme (AUS). This arrangement ensures that 85% of India's outbound steel shipments remain shielded from the most restrictive British curbs.

Operationalising the CETA Framework

This breakthrough paves the way for the operationalisation of the Comprehensive Economic and Trade Agreement (CETA) starting July 15. The agreement is designed to minimize market disruptions and maintain a balanced trading environment for both nations. Given that India's exports of iron, steel, and related products to the UK stood at a substantial USD 893.4 million in the 2025-26 period, the protection of these volumes is critical for India's manufacturing sector.

The successful negotiation demonstrates the "collaborative strength" of the India-UK partnership, moving the bilateral relationship closer to a fully functional trade ecosystem.

The Looming Challenge of Carbon Taxes

While the steel quota issue has been largely resolved, a new economic challenge looms on the horizon: the UK's Import Carbon Pricing Mechanism, similar to the EU's Carbon Border Adjustment Mechanism (CBAM). Set to take effect in 2027, this carbon tax will target energy-intensive sectors including iron, steel, aluminium, fertiliser, cement, and hydrogen.

According to the Global Trade Research Initiative (GTRI), Indian exports worth approximately USD 775 million could be impacted by these carbon levies. Once free allowances under the UK’s Emissions Trading Scheme (ETS) are phased out, the tax could range between 14% and 24% of the total import value. For Indian industry leaders, navigating this green transition will be the next major hurdle in maintaining competitiveness in the British market.

Key Takeaways