India’s steel exports get EU quota boost, but carbon costs remain a hurdle: Report

India’s steel exports to the European Union (EU) could get a boost under the proposed free trade agreement, but exporters will still face high carbon-related costs.

According to the legal text of the FTA, India will be allowed to export up to 1.64 million metric tonnes of steel a year to the EU. This includes an additional preferential quota of 694,853 tonnes over the existing 946,616-tonne World Trade Organization (WTO) quota, Reuters reported.

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

Industry seeks more

However, the Indian steel industry reportedly believes the proposed access is not enough. Producers are seeking quotas 29-35 per cent higher across various steel products, according to an industry note reviewed by Reuters.

Also read: US tariffs on Indian steel: Limited blow, but dumping fears loom large

“India's total guaranteed country-specific quota under the agreement is smaller than its current total entitlement, putting the country in an unfavourable position with regard to market access,” the note submitted to the trade ministry reportedly said.

The bigger concern for exporters could be what happens beyond the quota. Steel shipments above the permitted limit will attract the EU’s 50 per cent tariff, according to an analysis of the agreement by India-based think tank Global Trade Research Initiative (GTRI).

Carbon cost

The preferential quota also does not exempt Indian steel from the EU’s Carbon Border Adjustment Mechanism (CBAM), which applies to steel imports. GTRI estimates that the carbon levy could average around 35 per cent of the value of shipments once the mechanism is fully phased in. the report said.

This means that while the FTA could give Indian steel producers greater assured access to the European market, the carbon cost will remain a major factor in determining how competitive those exports are.

Also read: India-UK FTA to come into force from July 15: What it means for businesses and consumers

Most of India’s quota is allocated to flat-steel products, with hot-rolled sheets and strips receiving the largest allocation of 509,605 tons.

Subject to changes

The additional quota will become available once the India-EU FTA comes into force, which is expected by the end of the year. It will also remain subject to product coverage, rules of origin and quota availability.

The legal text was released on Friday (September 11) and could still be revised before the agreement is finalised.