India gains wider EU steel access, but carbon levy remains
Under the concluded India-EU Free Trade Agreement, India has secured an additional preferential tariff-rate quota (TRQ) of 694,853 tonnes of steel per year, on top of its existing WTO-origin quota of 946,616 tonnes — taking India's total country-specific EU steel quota to about 1.64 million tonnes annually.
The combined quota is estimated to cover roughly 68.4% of India's 2025 steel exports to the EU (about 2.4 million tonnes), up from around 39.4% covered under the existing WTO quota alone.
Steel shipments beyond the quota ceiling continue to attract the European Union's steel safeguard tariff of 50%.
The expanded quota does not exempt Indian steel from the EU's Carbon Border Adjustment Mechanism (CBAM), which entered its definitive, financially binding phase from January 1, 2026 and applies uniformly to all steel imports regardless of quota status.
The agreement provides for periodic review of the quota — the first review one year after the FTA enters into force, and every five years thereafter.
EU's Carbon Border Adjustment Mechanism (CBAM)
CBAM is the European Union's climate policy instrument that imposes a carbon price on imports of select carbon-intensive goods, matching the carbon cost that EU domestic producers already bear under the EU Emissions Trading System (EU ETS). Its stated aim is to prevent "carbon leakage" — production and emissions shifting to countries with laxer climate rules — while equalising competitive conditions for EU industry.
Key Details
- CBAM covers six categories: iron and steel, cement, aluminium, fertilisers, hydrogen, and electricity, along with certain downstream steel products (e.g., screws, bolts).
- It had a transitional, reporting-only phase from October 2023, and entered its definitive phase on January 1, 2026, from which importers must hold "authorised CBAM declarant" status and purchase CBAM certificates matching the embedded emissions of imports (with a 50-tonne/year exemption for small importers under the EU's Omnibus simplification).
- Iron, steel and aluminium are India's most CBAM-exposed exports, given India's still coal-intensive steel production; studies note high-emission Indian steel exporters have already seen reduced EU export volumes during CBAM's reporting phase.
- CBAM applies independently of any trade agreement's tariff concessions — a lower or zero tariff under an FTA does not shield an exporter from the separate carbon-cost levy.
Even as the India-EU FTA widens India's tariff-preferential steel access, CBAM remains a parallel, unresolved cost barrier — explaining why gains from the quota expansion are described as partial rather than complete market access.
WTO Tariff-Rate Quotas (TRQs) and Safeguard Measures
A tariff-rate quota (TRQ) allows a fixed quantity of a good to enter a market at a lower ("in-quota") tariff, while any volume above that threshold pays a higher "out-of-quota" tariff — a mechanism WTO members use to liberalise trade gradually while protecting domestic industry from import surges.
Key Details
- The EU's existing 946,616-tonne steel TRQ for India originates from a WTO-consistent global steel safeguard measure (first imposed in 2019, renewed periodically) that allocates country-specific and "residual" quotas across steel product categories to manage import surges into the EU market.
- WTO safeguard measures are governed by the Agreement on Safeguards, which permits temporary import restrictions (tariffs or quotas) when a surge in imports causes or threatens serious injury to a domestic industry, subject to review and time limits.
- Exports above the TRQ ceiling face the EU's applicable safeguard tariff, currently 50% on steel — a rate the EU has progressively tightened in recent renewals of its steel safeguard.
- The new FTA-linked 694,853-tonne quota is additive to (not a replacement of) the WTO-origin quota, meaning India now has two parallel country-specific quota streams into the same EU steel market.
The news event is specifically about enlarging the FTA-based TRQ component; understanding how TRQs interact with WTO safeguard law explains why India still faces a hard ceiling and a steep out-of-quota tariff despite the FTA.
India-EU Free Trade Agreement
India and the European Union concluded negotiations on a free trade agreement on January 27, 2026, after talks that had resumed in 2021 following an earlier lapse; the pact is expected to be signed later in 2026 and implemented in 2027, and would be India's largest FTA by trading-partner economic size once in force.
This steel-quota expansion is a direct, quantifiable outcome of the concluded FTA text, illustrating how a comprehensive trade agreement's market-access chapter (TRQs) can still leave adjacent regulatory measures (CBAM, safeguards) untouched.
- Additional FTA-based preferential steel quota for India: 694,853 tonnes/year
- Existing WTO-origin steel quota for India: 946,616 tonnes/year
- Combined total country-specific EU steel quota for India: approximately 1.64 million tonnes/year
- Coverage of India's 2025 EU steel exports (~2.4 million tonnes) under combined quota: approximately 68.4%, up from ~39.4% under the WTO quota alone
- EU out-of-quota steel safeguard tariff: 50%
- CBAM definitive (financially binding) phase start date: January 1, 2026
- India-EU FTA negotiations concluded: January 27, 2026
- First scheduled quota review: one year after FTA entry into force; subsequent reviews every five years