India’s commerce ministry says the new trade agreement with the European Union shields more than 80 per cent of Indian steel exports from Brussels quotas and carbon rules, while industry warns the agreement’s own annex may cut guaranteed access in sixteen product categories
NEW DELHI, 18 September 2026. India’s commerce ministry moved on Thursday to reassure steel exporters that the trade agreement concluded with the European Union will blunt the impact of the bloc’s new import regime and its carbon border levy, saying that more than 80 per cent of current Indian steel shipments to Europe would remain protected under the deal.
Industry did not accept the reassurance. Within hours, representatives of Indian producers were warning that the agreement’s own steel annex could leave exporters with less guaranteed country-specific access than they hold today, and calling for the numbers to be renegotiated before the agreement is signed.
The dispute is narrow, technical and consequential. It concerns the interaction between two European legal instruments and one bilateral treaty, and it will determine how much Indian steel enters the European market at conventional rates and how much faces a 50 per cent duty.
What the ministry said
Commerce ministry officials told reporters in New Delhi on Thursday that the India-European Union Trade and Economic Partnership Agreement, concluded in January and sent by the European Commission to the Council for signature authorisation on 11 September, is expected to soften the impact of both quota restrictions and the Carbon Border Adjustment Mechanism on Indian steel.
India exported close to three million tonnes of steel to the European Union in the 2025-26 financial year, according to the ministry. Of that, a tariff rate quota of 1.6 million tonnes under the agreement has already taken effect from 1 July. Officials said that once most favoured nation access and other applicable categories are added, Indian companies retain room to export more than 2.5 million tonnes to the European market.
The ministry framed this as limiting the impact on existing trade and giving steelmakers greater certainty in what remains one of India’s more important overseas markets.
On carbon, officials reported movement. Six foreign institutions have applied to act as accredited carbon verifiers for Indian exporters, a practical requirement for compliance with the European carbon border regime, since exporters must produce verified emissions data for covered goods. Officials also said the European Union has given India a written assurance that any relaxation granted to another country under the carbon mechanism would be extended to India as well.
For Indian exporters, the ministry argued, market access and carbon compliance have become a single linked problem, and the agreement is intended to address both.
What industry says
Representatives of Indian producers, speaking on condition of anonymity to ETV Bharat, described a different picture.
The core objection concerns sequencing and legal hierarchy. The European Union steel regulation has applied since 1 July, with detailed country allocations set out in Implementing Regulation 2026/1457. Once the bilateral agreement becomes operational, industry sources argue, Indian access will instead be governed by Article 2-B.1(2) of Annex 2-B of the agreement, which sets the tariff rate quota for Indian steel entering the Union, and that this could apply retroactively.
The concern is that the annex figures are lower than the allocations Indian producers currently hold under the implementing regulation. On that reading, exporters across sixteen affected product categories would see guaranteed country-specific access reduced by the very agreement intended to protect them. The categories named include hot rolled and cold rolled sheets, metallic and organic coated sheets, tin mill products, quarto plates, stainless products, wire rods, gas pipes and welded pipes.
The commercial consequence would be immediate. An industry source warned that European importers could be asked to pay the 50 per cent out-of-quota tariff wherever volumes exceed the annex quota, even where those same imports sit within the quota under Implementing Regulation 2026/1457. Two parallel quota regimes producing different answers on the same consignment is, as the source put it, a recipe for trade uncertainty and a competitive disadvantage for Indian suppliers, which is not what the agreement was intended to produce.
The industry ask is specific: before ratification and signature, India should seek an upward revision from the European Commission so that the annex allocation at minimum matches India’s existing entitlement under the implementing regulation in each of the sixteen affected categories.
The European regime that triggered it
The dispute exists because the European Union rebuilt its steel import architecture this summer.
Regulation 2026/1384, published in the Official Journal on 24 June and applying from 1 July, replaced the safeguard measure that expired at the end of June. Where the safeguard had permitted tariff-free imports up to a quota with a 25 per cent duty above it, the new measure cuts tariff-free volumes by 47 per cent to 18.3 million tonnes a year relative to 2024 levels, doubles the out-of-quota duty to 50 per cent, and expands product scope from 28 categories to 30.
The measure is aimed at global overcapacity, which in European official language principally means China. The European Steel Association has described crude steel output in the bloc as having fallen to a historic low in 2026, and the Commission has presented the regulation as a response to that condition.
The difficulty for third countries is that a measure calibrated against one supplier applies by product category to all of them. India is not accused of overcapacity dumping into Europe. Indian producers have invested heavily in capacity aimed at domestic demand growth and have used European sales as a balancing outlet. They nonetheless face the same halved quotas and doubled penalty rate.
The United Kingdom made an equivalent move on the same date, replacing its expiring safeguard with a measure reducing tariff-free volumes by 51 per cent and applying a 50 per cent duty above quota. For Indian exporters, the two largest European destinations tightened simultaneously.
Carbon on top of quota
The Carbon Border Adjustment Mechanism compounds the problem because it operates on a different logic and a different timetable.
The mechanism requires importers of covered goods, including iron and steel, aluminium, cement, fertilisers, electricity and hydrogen, to account for the embedded emissions of those goods and to surrender certificates priced against the European carbon market. Its stated purpose is to prevent carbon leakage, meaning the relocation of emissions-intensive production to jurisdictions with weaker carbon pricing.
Indian steel is disproportionately exposed. A substantial share of Indian production uses coal-based direct reduced iron and blast furnace routes with emissions intensity well above the European average, reflecting the country’s coal endowment and the relative scarcity of natural gas and scrap. The gap is not a matter of inefficiency so much as of input availability, which is why Indian negotiators have consistently argued that the mechanism penalises development stage rather than carbon performance.
The verification question the ministry raised on Thursday is practical rather than philosophical. Compliance requires verified installation-level emissions data. Until accredited verifiers are available to Indian producers at reasonable cost, exporters face either default values, which are punitive, or the administrative burden of building verification capacity from scratch. Six institutions applying to act as verifiers is therefore a meaningful step, though the ministry did not say when accreditation would be complete.
The written assurance on parity, that any relaxation extended to another country would be extended to India, is the more strategically significant point. It converts a unilateral European instrument into something India can monitor and invoke. Whether it is legally binding, and in what forum it could be enforced, was not specified.
India’s wider trade posture
The steel dispute sits inside a broader repositioning of Indian trade policy that has accelerated through 2026.
India concluded negotiations with the European Union in January on what officials in both capitals have described as the largest trade agreement either has signed. The Commission’s proposal to the Council on 11 September requests authorisation to sign and conclude. If the Council authorises, signature could follow by December, with entry into force targeted for early 2027 after European Parliament consent.
The headline numbers favour European exporters on paper. Tariffs would be eliminated or reduced on 96 per cent or more of European goods exports to India, saving European firms an estimated four billion euros a year in duties. Machinery, chemicals and pharmaceuticals see the largest reductions. Car tariffs fall gradually to 10 per cent within a quota of 250,000 vehicles a year, and duties on aircraft and spacecraft are eliminated for nearly all products.
India’s gains lie in services, in labour-intensive goods, and in the predictability of access to a market of comparable size. The steel annex dispute is therefore about whether one of the agreement’s headline benefits is real.
Simultaneously, India has been among the world’s most active users of trade remedies. Its Directorate General of Trade Remedies initiated thirteen new anti-dumping and countervailing cases in September and issued fifteen final findings across sectors including glass fibre, steel, solar cells and chemicals, with imports from China and South Korea the most common target. New investigations opened on 11 September into cold rolled flat products of stainless steel in the 300 and 400 series from China, Indonesia and Vietnam, and into nylon 6 chips and granules from China and Russia.
India is also negotiating with the Eurasian Economic Union, where reporting from mid-September indicates the pace of talks has quickened. Commerce Minister Piyush Goyal is expected in the United States late this month for the G20 trade ministerial and bilateral discussions. Goyal has projected Indian exports reaching approximately 863 billion dollars in 2026, an all-time high.
The pattern is of a country negotiating access aggressively while defending its domestic market with equal energy. That is not contradictory. It is the standard posture of a large economy with a rapidly expanding industrial base and a persistent goods deficit with China.
The arithmetic in dispute
Reduced to numbers, the disagreement between the ministry and the industry is about which denominators count.
The ministry’s position rests on aggregation. Roughly three million tonnes of Indian steel went to the European Union in the 2025-26 financial year. A tariff rate quota of 1.6 million tonnes under the bilateral agreement has applied since 1 July. Add the volumes Indian producers can ship under most favoured nation access and other applicable categories and the total available headroom exceeds 2.5 million tonnes, which the ministry characterises as covering more than 80 per cent of existing trade.
The industry position rests on disaggregation. Steel is not a single commodity and the European regime does not treat it as one. Access is allocated by product category, and a producer of tin mill products cannot use unused headroom in wire rods. Sixteen categories are affected. If the agreement annex sets a lower figure than the implementing regulation in any given category, the producers in that category lose guaranteed access regardless of what the aggregate total shows.
The two positions are therefore not contradictory. Both can be true simultaneously. The aggregate may indeed cover more than 80 per cent of tonnage while individual categories are worse off, and the firms in those categories are not comforted by a national total.
There is a second layer to the dispute concerning which instrument governs. The industry’s reading is that once the agreement is operational, Article 2-B.1(2) of Annex 2-B becomes the controlling provision for Indian steel, displacing the country allocation in Implementing Regulation 2026/1457, and that this may apply retroactively. If correct, an importer who accepted a consignment in reliance on the implementing regulation allocation could face a 50 per cent duty assessment after the fact.
Whether that reading is correct is a question of treaty interpretation that neither government has publicly resolved. The absence of a clear answer six weeks before the Council considers signature authorisation is itself the problem industry is pointing at.
Perspectives from the other side
European steel producers view the same facts differently. Their association has described the bloc’s crude steel output as having reached a historic low in 2026, and their argument is that the new regime is the minimum necessary to prevent further plant closures. From that perspective, any expansion of a country-specific quota, for India or anyone else, weakens a measure that was already calibrated to a fixed total of 18.3 million tonnes. Every additional tonne granted to one origin comes out of the same pool.
That is the structural difficulty with quota diplomacy. The European measure sets an aggregate ceiling. Bilateral agreements allocate shares of it. A country that negotiates a better share does so at the expense of others, which converts what should be a bilateral trade negotiation into a multilateral distribution problem with no forum in which to conduct it.
European steel users take a third position. Fabricators, machinery builders, automotive suppliers and construction firms consume more steel than European mills produce and employ considerably more people than the mills do. For them, tighter quotas from any origin mean higher input costs. Indian supply has been one of the more reliable diversification routes away from Chinese, Russian and Turkish material, and user industries have an interest in Indian access being preserved that runs directly counter to the producers’ interest.
What it means for global supply chains
For companies sourcing steel and downstream steel products, the Indian dispute illustrates a problem that is becoming general.
The first lesson is that quota entitlements under a free trade agreement and quota entitlements under an autonomous import measure are separate legal creatures that can produce contradictory results on the same shipment. Any importer relying on preferential access under a trade agreement into a market that also operates a safeguard or equivalent measure needs to establish which instrument governs, whether the agreement displaces the autonomous measure or sits alongside it, and what happens when the two allocations diverge. The Indian case suggests that this question is being resolved after agreements are concluded rather than before.
The second is that retroactivity is a live risk. Industry sources have warned that the agreement annex may apply retroactively once operational, which would mean shipments already cleared under one allocation being reassessed under another. Importers holding long-dated contracts for Indian steel into the European Union should seek written confirmation of the applicable quota basis and should ensure contracts allocate the risk of reassessment explicitly.
The third is that carbon compliance is becoming a trade barrier in practical terms regardless of its regulatory intent. An exporter that cannot obtain accredited verification cannot demonstrate its actual emissions and is assessed on default values that assume worse performance than reality. For suppliers in developing economies, the constraint is the availability of verification infrastructure, not the carbon intensity of production. Buyers who value continuity of supply from Indian mills have a direct interest in helping their suppliers secure verification capacity.
For European buyers specifically, the dispute matters because Indian steel has functioned as a diversification option away from Chinese, Russian and Turkish supply. If the agreement reduces rather than expands guaranteed Indian access, European users lose an alternative at the moment the bloc is deliberately constricting others.
What to watch
Three developments will resolve the question.
The first is whether India formally requests an upward revision of the Annex 2-B allocations before signature, and whether the Commission entertains it. The window is narrow. The Council is considering authorisation now, with signature targeted for December.
The second is the accreditation timetable for carbon verifiers serving Indian exporters. Applications are not approvals, and the practical compliance position for the 2027 export season depends on how quickly the six applicants are cleared.
The third is whether the written parity assurance on carbon relaxations is reflected in any legal text. An assurance recorded in a side letter has different value from one recorded in the agreement, and exporters planning capital expenditure on decarbonisation need to know which they have.
For now, Indian steel exporters face a familiar position for suppliers to the European market in 2026: a smaller quota, a higher penalty rate above it, a carbon levy layered on top, and a trade agreement whose benefits depend on annex arithmetic that has not yet been settled.
Assessment
The commerce ministry is not wrong that the agreement improves India’s position relative to having no agreement at all. A dedicated tariff rate quota of 1.6 million tonnes, layered on top of most favoured nation access, is worth more than exposure to the general regime alone, and the written assurance on carbon parity is a genuine negotiating achievement that few third countries have obtained.
Industry is also not wrong that a headline improvement can conceal category-level deterioration, and that the moment to fix an annex is before signature rather than after. Trade agreements are notoriously difficult to reopen, and a quota schedule embedded in an annex acquires the permanence of the treaty itself.
The larger point is that the European Union’s shift toward quantitative protection is producing exactly the outcome that quota regimes always produce. Access becomes a scarce administered resource, allocated between competing origins from a fixed pool, and the negotiation shifts from tariff rates to shares. Countries with the leverage to negotiate bilateral allocations do better than those without. Producers inside categories where allocations are generous do better than producers in categories where they are tight. Neither outcome tracks efficiency or carbon performance.
For Indian steelmakers, the immediate task is to establish, in writing and before the Council acts, which instrument governs their access and whether the answer can change retroactively. For European buyers, the task is to ensure that contracts for Indian material allocate the risk of reassessment clearly. For everyone else, the Indian case is a preview of the questions that will arise as the European Union concludes further agreements with partners who also export steel into a market whose total intake has been fixed at 18.3 million tonnes.