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

India has achieved a significant diplomatic and commercial breakthrough in the ongoing Free Trade Agreement (FTA) negotiations with the United Kingdom. By securing protection for 85% of its steel exports, India has successfully navigated one of the most contentious hurdles in the Comprehensive Economic and Trade Agreement (CETA).

A Landmark Consensus on Steel Trade

The primary friction point in the bilateral trade pact was the UK's proposed steel safeguard regime, which threatened to restrict Indian shipments. However, following high-level discussions between India’s Commerce and Industry Minister Piyush Goyal and UK Secretary of State for Business and Trade Peter Kyle, a consensus has been reached.

Under the new agreement, which is set to be operationalised from July 15, India has secured a multi-layered protection strategy. Instead of facing blanket restrictions, Indian exporters will benefit from a combination of Country-Specific Quotas (CSQ), residual quotas, and access under the Authorised Use Scheme (AUS). This strategic mix ensures that the vast majority of India’s outbound steel shipments remain unaffected by the UK's tightening import limits.

Understanding the UK's New Safeguard Regime

The resolution comes at a critical time as the UK prepares to implement a revised safeguard framework on July 1, 2026. The new British regime is significantly more stringent than previous versions, aiming to protect domestic manufacturing by capping tariff-free steel imports.

Key details of the UK's upcoming measures include:

For India, which saw iron and steel exports to the UK reach USD 893.4 million in 2025-26, this protection is vital to maintaining market share and preventing massive commercial disruptions.

The Looming Challenge: Carbon Border Taxes

While the steel safeguard hurdle has been cleared, Indian exporters face a secondary challenge in the form of Britain's "Import Carbon Pricing Mechanism." Similar to the European Union's Carbon Border Adjustment Mechanism (CBAM), this framework is scheduled to come into force in 2027.

The UK's carbon tax will target carbon-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 this mechanism. As free allowances under the Emissions Trading Scheme (ETS) are phased out, the tax could range between 14% and 24% of the total import value, posing a significant cost pressure on Indian manufacturers.

Key Takeaways