The India-EU free-trade agreement (FTA) does not relax carbon border adjustment rules (CBAM) for Indian steelmakers, but EU support for India's decarbonisation efforts and potential quota benefits are favourable for the industry.
The European Commission has confirmed that the FTA offers no exemption from CBAM, which is concerning for India's steel sector because of high default emissions values and roadblocks to getting emissions verified, market participants told Argus.
Currently, Indian hot-rolled coil (HRC) faces a prohibitive CBAM default value of over 4t of CO₂ per tonne of steel, implying an additional cost of more than €200/t ($239/t) purely from carbon charges.
"Many companies are not getting the actual emission numbers from their suppliers or their supply chain. If any of your suppliers are not providing you the actual numbers, then you will have to fall back on the default values," said Nilesh Bhattad, founder of CleanCarbon.ai, an environment consultancy firm.
Another major challenge is managing the logistics of audits as authorised agencies will need to carry out CBAM audits on a large scale by physically visiting thousands of companies, Bhattad said.
"All these questions still remain unanswered [by the FTA] and more detailed discussions would be needed to specifically address this," Bhattad added.
A key favourable factor under the FTA is the EU's plan to allocate €500 million ($597mn) over the next two years to support India's emissions reduction efforts.
But this does not "address exporters' immediate, product-level carbon-tax costs, leaving CBAM largely unresolved," a report by think-tank Global Trade Research Initiative (GTRI) said.
Industry participants noted India could benefit from getting a "most favoured nation" assurance, under which any exemption or support the EU grants to other countries would also extend to India.
There may still be an opportunity for benefits or relaxations to be given to India under the EU's safeguard quotas — expected to nearly halve from the mid-year — an Indian trading firm said.
Overall, the FTA is favourable for the industry but the lack of CBAM relaxations could still hamper Indian steel exports into Europe, a steel analyst said.
The EU accounted for half of India's 8.4mn t of iron and steel exports from January-November 2025, data from Global Trade Tracker show.
At present, there is still no concrete clarity on what specific benefits India's steel industry will receive under the FTA, an Indian steel mill source said.
