New Delhi: India is seeking 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 attempts to resolve a growing dispute over British restrictions on steel imports. The disagreement has emerged as a major obstacle to the implementation of the landmark trade pact, despite negotiations having been concluded nearly a year ago.
According to sources familiar with the matter, India has conveyed its concerns to the UK government after British authorities announced tighter steel import quotas and higher tariffs on shipments exceeding those limits. The Indian steel industry has argued that the proposed quotas are significantly lower than the country’s current export levels and could undermine the benefits expected from the FTA.
Industry representatives have urged the government to secure a quota equivalent to the average value of India’s steel and steel product exports to the UK over the last three years. India’s exports of iron, steel, and related products to the UK reached approximately $893.4 million in 2025-26, making the sector one of the most important components of bilateral merchandise trade.
Sources indicated that several categories of Indian steel exports would be adversely affected if the UK’s proposed quotas are implemented in their current form. Officials and industry stakeholders believe that the restrictions could result in substantial losses for Indian exporters despite the tariff concessions promised under the trade agreement.
The dispute stems from a decision taken by the UK government in March to reduce tariff-free quotas on imported steel and increase tariffs on imports exceeding those quotas from 25 percent to 50 percent. London justified the move by citing concerns over global steel overcapacity and the need to protect domestic manufacturers from market distortions.
Trade experts note that similar measures have been adopted by both the European Union and the United States, which have also raised tariffs on steel imports outside designated quota limits. Such policies are often intended to prevent trade diversion, where steel exports blocked from one market are redirected to another. However, analysts point out that the UK possesses relatively limited domestic steel production capacity, making access to imported steel an important component of its industrial supply chain.
The issue has taken on additional significance because the UK’s steel sector, while accounting for only a small share of national economic output, remains politically sensitive. The industry supports approximately 37,000 jobs, many of them located in traditional industrial regions that form an important part of the Labour Party’s support base. Prime Minister Keir Starmer’s government is also facing mounting political pressure following disappointing results in recent local elections, adding to the complexities surrounding trade policy decisions.
Beyond steel quotas, Indian exporters are also preparing for another challenge in the form of the UK’s upcoming Carbon Border Adjustment Mechanism (CBAM). Scheduled to come into force on January 1, 2027, the mechanism will impose a carbon price on imports from emissions-intensive sectors, including iron and steel, aluminium, cement, fertilisers, and hydrogen.
The UK government has indicated that the scope of the CBAM could be expanded in future years as authorities continue to assess carbon leakage risks and technological developments. Indian industry bodies have expressed concerns that the mechanism could increase compliance costs and reduce the competitiveness of exports in the British market.
Officials described the steel quota issue as the more immediate concern because the British restrictions are scheduled to take effect from July 1. The government is therefore seeking a swift resolution to ensure that Indian exporters continue to enjoy meaningful market access under the FTA framework.
Sources also indicated that India may consider retaliatory trade measures if its concerns are not adequately addressed. One option reportedly under discussion is the imposition of restrictions affecting imports of Scotch whisky, a key British export that received significant tariff benefits under the trade agreement.
The outcome of the negotiations will be closely watched by businesses on both sides, as the India-UK FTA has been hailed as a major step toward deepening economic ties between the two countries.
