India Seeks $900 Million Steel Export Quota in UK Under FTA Amid Dispute Over New Import Restrictions

India is pushing for a steel export quota worth nearly $900 million in the United Kingdom market under the bilateral Free Trade Agreement (FTA) signed in July 2025, as New Delhi seeks to address concerns arising from the UK’s newly announced restrictions on steel imports.

According to sources familiar with the matter, the disagreement over steel quotas has delayed the implementation of the landmark trade agreement, despite negotiations having been concluded nearly a year ago.

The issue has emerged as one of the first major challenges in the execution of the India-UK trade pact.

Indian Steel Industry Raises Concerns Over UK Quotas

The Indian steel industry has expressed serious reservations about the quotas announced by the United Kingdom, arguing that the proposed limits could effectively restrict even the existing volume of India’s steel and steel product exports to Britain.

Industry representatives have urged the government to ensure that India receives a quota at least equivalent to the average level of its steel and steel product exports to the UK over the past three years.

According to sources, the quota proposed by Britain, which is scheduled to take effect from July 1, falls significantly short of India’s current export levels.

“Our quota should be at least equal to the average exports recorded over the last three years.

The quota proposed by the UK is considerably lower than our existing export volumes.

Consequently, the Indian steel industry could suffer despite the signing of the FTA.

Several product categories in which India has substantial export interests would face significant losses because our exports substantially exceed the proposed quota limits,” a source said.

Industry insiders have warned that Indian steel manufacturers could face major setbacks in at least six key categories where exports to the UK market are particularly significant.

Threat of Retaliatory Measures

Government officials have indicated that India may consider retaliatory measures if the country’s interests are adversely affected by the UK’s actions.

According to officials, one of the options under consideration could be imposing restrictions on imports of Scotch whisky, a product that holds significant commercial importance for Britain.

The indication of possible countermeasures reflects the seriousness with which New Delhi is viewing the issue and underscores its determination to protect domestic industry interests under the bilateral trade arrangement.

Two Major Regulatory Challenges for Indian Exports

Even after the successful conclusion of trade negotiations, Indian industrial exports to the UK continue to face two significant regulatory hurdles.

Officials said the immediate concern is the steel quota regime, which comes into force on July 1. This will be followed by another challenge in the form of the UK’s Carbon Border Adjustment Mechanism (CBAM), scheduled to become operational on January 1, 2027.

The Ministry concerned did not respond to queries seeking clarification on the matter.

UK’s Carbon Border Tax Could Create New Challenges

Under the UK’s CBAM framework, imported industrial goods with high carbon emissions will be subjected to a carbon price.

Initially, the mechanism will cover sectors such as aluminium, cement, fertilisers, hydrogen, and iron and steel, industries considered particularly vulnerable to carbon leakage.

Carbon leakage refers to the relocation of production to countries with comparatively less stringent environmental regulations.

The British government has also indicated that the scope of the mechanism may expand in the future.

In an official statement, the UK government said that the sectoral and product coverage of the CBAM would remain under review beyond 2027 as fresh evidence emerges and as technological and methodological advancements reshape assessments of carbon leakage risks.

Steel Exports Form a Significant Part of India-UK Trade

India’s exports of iron, steel and related products to the United Kingdom stood at approximately $893.4 million during 2025-26.

These exports constitute a substantial component of India’s total merchandise exports to Britain, which amounted to $13.4 billion during the same period.

Given the importance of steel exports to bilateral trade, any restrictive measures imposed by Britain could have significant implications for Indian manufacturers and exporters.

Why the UK Introduced New Steel Restrictions

In March, the United Kingdom lowered the tariff-free quota for imported steel and simultaneously doubled tariffs on imports exceeding the prescribed limits, increasing duties from 25 per cent to 50 per cent.

British authorities justified the decision by citing concerns over excess global steel production and its potential impact on the country’s domestic steel industry.

Trade experts note that such measures are generally adopted to prevent trade diversion from other regions, particularly the European Union and the United States, both of which have also increased tariffs on steel imports beyond designated quotas to 50 per cent.

However, experts also point out that Britain’s own steel manufacturing capacity remains relatively limited, making imports essential for meeting domestic demand.

Political Considerations Also Influencing Policy

According to a report by Reuters, the UK’s steel sector accounted for only 0.1 per cent of the country’s total economic output in 2024.

Nevertheless, the industry supports around 37,000 jobs, many of them concentrated in traditional industrial regions that have historically formed the political strongholds of the governing Labour Party.

The Labour Party itself traces its roots to Britain’s trade union movement and has longstanding associations with the country’s industrial workforce.

The issue also assumes greater political significance at a time when Prime Minister Keir Starmer is facing growing challenges.

His Labour Party has recently suffered notable setbacks in local elections across the country, increasing pressure on the government to protect domestic industries and employment.

As India and the United Kingdom move towards implementing their ambitious Free Trade Agreement, the dispute over steel quotas and upcoming carbon regulations highlights the complexities involved in balancing free trade commitments with domestic industrial and political priorities.

The coming weeks are likely to prove crucial in determining whether both countries can resolve these differences and fully operationalise the trade pact.