India-EU FTA: India Gets 1.64 Mn-Tonne Annual Steel Quota, But CBAM Costs Remain

New Delhi, Sep 15 (KNN) India will be able to export up to 1.64 million metric tonnes of steel annually to the European Union (EU) under the India-EU free trade agreement (FTA), significantly expanding preferential market access, but exporters will continue to face carbon-related costs under the EU’s Carbon Border Adjustment Mechanism (CBAM), according to the pact’s legal text.

The agreement provides India with an additional preferential quota of 694,853 tonnes, over and above the existing 946,616-tonne WTO quota. 

The combined quota would cover about 68.4 per cent of India’s 2.4 million tonnes of steel exports to the EU in 2025, compared with 39.4 per cent under the existing quota, Reuters reported.

Steel Above Quota Faces 50% Tariff

Steel shipments exceeding the quota will attract the EU’s 50 per cent tariff, according to an analysis of the agreement by the Global Trade Research Initiative (GTRI). The legal text was released on Friday and could still undergo revisions.

Most of the additional quota has been allocated to flat-steel products, with hot-rolled sheets and strips receiving the largest allocation of 509,605 tonnes.

The additional quota will become available once the FTA enters into force, which is expected by the end of the year. Its utilisation will remain subject to product coverage, rules of origin and quota availability.

CBAM Costs to Continue

The preferential quota will not exempt Indian steel from the EU’s CBAM, which applies to steel imports regardless of the tariff treatment. GTRI estimates that the carbon-related cost could average around 35 per cent of the value of steel imports once CBAM is fully phased in.

This means the larger tariff-free or preferential access under the FTA will not eliminate the additional carbon-related cost faced by Indian steel exporters in the EU market.

Steel Industry Seeks Higher Quotas

Indian steel producers are seeking 29–35 per cent higher quotas across product categories, according to a note prepared by industry representatives and reviewed by Reuters.

The industry has argued that India’s guaranteed country-specific quota under the agreement is smaller than its current overall entitlement, putting Indian exporters at a disadvantage in terms of market access.

The legal text and quota arrangements remain subject to the finalisation of the agreement.

(KNN Bureau)