Indian steelmakers are unlikely to see immediate relief under the India–EU free trade agreement, with steel remaining outside full tariff elimination due to its strategic importance and employment considerations. India will instead seek improved access to the European Union’s tariff-free steel import quotas, with outcomes on this front expected in the coming months.
Under the agreement, steel will be eligible for preferential market access through tariff rate quotas (TRQs) rather than blanket duty elimination. As part of the deal, 6.1% of tariff lines, covering 6% of India’s exports, will receive preferential access either through tariff reductions or quota-based exemptions.
Steel is among the sectors included under the TRQ framework, alongside automobiles and certain shrimp and prawn products.
Preferential Trade Treatment
“The European Union has come in with a new set of proposals on steel, and we have agreed in good faith to work together towards a very preferential treatment as a free trade agreement so that India gets a better deal than most other countries with whom the EU does not have an FTA. And I do believe that it will be resolved satisfactorily over a period of time, since it has to go through the motions over the next six or eight months,” union minister of commerce Piyush Goyal said.
However, India has not secured any exemption from the EU’s Carbon Border Adjustment Mechanism (CBAM). Instead, it will participate in a technical working group for verifying carbon footprints and receive EU support for emissions reduction initiatives.
In a joint statement, the two partners said that they will also work towards sharing experiences on the design and implementation of India’s Carbon Credit Trading Scheme (CCTS), and the EU’s Emissions Trading Scheme (ETS) and exploring further cooperation.
CBAM is the European Union’s mechanism to levy a carbon cost on imports based on the emissions generated during production. From January 2026, European importers of steel will be required to pay a charge linked to embedded emissions, unless an equivalent carbon price has already been paid in the exporting country.
Altered Export Economics
For Indian steel exporters, CBAM is expected to materially alter export economics. Higher emissions intensity from coal-based blast furnace routes could raise landed costs in the EU market, potentially affecting margins in a region where pricing flexibility is limited.
During its fiscal third quarter earnings call late last week, JSW Steel indicated that the full impact of CBAM is still being assessed. Management said the company exports around 1.2–1.3 million tonnes of steel annually to Europe, while noting that Europe’s share in its overall exports has been declining as volumes shift towards Asia and the Middle East.
The steelmaker’s management also said that emissions verification under CBAM will be conducted on a plant-wise basis rather than at a company level and that the process is currently underway. Certificates for exports made in 2026 are expected to be issued after the end of the year, with the corresponding CBAM payments likely to crystallise in early 2027.