India Secures 1.64M Tonne Steel Export Quota in EU Trade Agreement

India has secured an annual export quota of 1.64 million tonnes of steel to the European Union under a new draft trade agreement. The deal provides a structured pathway for steel shipments, but it does not offer an exemption from the EU’s Carbon Border Adjustment Mechanism (CBAM). This mechanism remains a cost factor for Indian manufacturers.

"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," noted a filing submitted to the Indian trade ministry.

Quota Structure and Tariff Risks

The 1.64 million-tonne quota encompasses 16 distinct steel categories, including specialized products like stainless hot-rolled quarto plates and metallic-coated sheets. According to a report from The Tribune, the allocation is divided into two components:

• Most-Favoured-Nation (MFN) component: 0.95 million tonnes.
• FTA-specific component: 0.69 million tonnes.

Exporters must remain within these limits to avoid punitive measures. Shipments exceeding the established quota will be subject to a 50% tariff under the EU’s Steel Overcapacity Regulation, which officially took effect on July 1, 2026.

The Impact of Environmental Regulation

Indian steel producers face the financial burden of the EU’s CBAM. This regulation requires importers to pay a levy based on the carbon emissions generated during the production process. The Global Trade Research Initiative estimates that these carbon-related costs could average approximately 35% of the total value of steel imports once the mechanism is fully implemented.

Indian exporters must navigate volume restrictions and rising compliance costs associated with the EU’s green trade initiatives.

Reciprocal Automotive Provisions

The agreement includes reciprocal market access for the European automotive sector. The EU is permitted to export 100,000 internal combustion engine and non-plug-in hybrid vehicles to India in the first year of the deal. This quota will increase to 160,000 units annually by the tenth year of the agreement.

What Is at Stake for Indian Steel

The trade agreement provides a framework for balancing market access with environmental standards. For the Indian steel industry, the primary concern is the disparity between the new guaranteed quota and historical export volumes. The competitiveness of Indian steel in the European market will depend on the utilization of these quotas and the industry's ability to decarbonize manufacturing processes to mitigate the impact of CBAM levies.