UK’s steel safeguard, carbon tax prevent implementation of India-UK trade pact

New Delhi, June 1: India and the UK will discuss Britain’s steel safeguard measure and carbon border adjustment mechanism (CBAM) on Tuesday as these issues have become a sticking point in the implementation of the bilateral free trade pact, which was signed on July 24, 2025, government sources said.
They said that India may re-balance some duty concessions on certain products like Scotch Whiskey under the agreement with the UK if these issues do not get addressed.
The steel and the CBAM issues will figure prominently during the meeting between UK Secretary of State for Business and Trade Peter Kyle and Commerce and Industry Minister Piyush Goyal on June 2.
These issues have become a kind of sticking point in the implementation of the Comprehensive Economic and Trade Agreement (CETA).
From July 1, 2026, the UK will limit tariff-free steel imports, reducing overall quota volumes by 60 per cent compared to the steel safeguard measure. Any imports above these levels will then face a 50 per cent tariff.
The measure will apply to imports of steel products that can also be made in the UK.
Earlier, Britain had safeguard measures that also imposed import quotas. The new measures reduce that quota.
The UK government in December 2023 also decided to implement its CBAM starting in 2027.
According to economic think tank GTRI, India’s exports worth USD 775 million to the UK may be impacted due to Britain’s decision to introduce a carbon tax on products like iron and steel, aluminium, fertiliser and cement, from 2027. The UK, after the European Union, will be the second economy to implement CBAM. It calls the move the import carbon pricing mechanism, and it will initially focus on sectors like iron, steel, aluminium, fertiliser, hydrogen, ceramics, glass, and cement.
This tax could range from 14-24 per cent of the import value on full phase-out of free allowances under the ETS (Emission Trading System).
During his visit to London in 2025, Commerce and Industry Minister Piyush Goyal flagged concerns over this tax and conveyed that India may consider retaliation if the UK goes ahead with the plan.
India’s exports of iron and steel and their products to the UK stood at USD 893.4 million in 2025-26, accounting for a significant share of USD 13.4 billion in total merchandise exports to the UK.
Sources also said that India could consider re-balancing the UK’s steel issue with British scotch concessions, offered by India in the CETA.
As per the pact, India has announced reducing the duty on UK whisky and gin from 150 per cent to 75 per cent and further to 40 per cent in the 10th year of the deal. In India, Scotch whisky brands such as Johnnie Walker, Chivas Regal, and The Glenlivet are the most popular. Among these, Johnnie Walker is one of the best-selling Scotches here. (PTI)