India, as a major steel producer, has received an annual export license for 1.64 million tons of steel to the European Union under a new free trade agreement. This agreement requires Indian steel exports to pay associated carbon costs, which remain mandatory for exporters.
Details of the Agreement and Quotas
This agreement grants India an additional preferential quota of 694,853 tons of steel, which is added to the current quota of 946,616 tons under the World Trade Organization. With this, the total quota will represent about 68.4% of India's 2.4 million tons of steel exports to the European Union in 2025, showing a significant increase from 39.4% in the previous quota.
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Challenges and Economic Implications
The Indian steel industry has requested a 29 to 35 percent increase in quotas for various products from the European Union. However, reports indicate that the total guaranteed quota for the country under this agreement is less than its current overall realities, putting India in a disadvantageous position regarding market access.
According to analyses conducted, steel that exceeds this quota will face a 50 percent tariff from the European Union. These calculations were made by a research group based in India called the Global Trade Research Initiative (GTRI). Additionally, the preferential quota does not exempt Indian steel from the European Union's carbon border adjustment mechanism, which applies to all steel imports. This mechanism may account for about 35 percent of the final value of steel on average.
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