India gains wider EU steel access, but carbon levy remains

By Manoj Kumar and Neha Arora

NEW DELHI, Sept 14 (Reuters) - India will be able to export up to 1.64 million metric tons of steel a year to the European Union under a free trade agreement, but exporters will still face carbon-related costs, according to the legal text of the pact.

• The agreement provides India with an additional preferential quota of 694,853 tons of steel, on top of an existing 946,616-ton WTO quota.

• The combined quota is equivalent to about 68.4% of India’s 2.4 million tons of steel exports to the EU in 2025, up from 39.4% under the existing quota.

• The Indian steel industry is seeking 29-35% higher quotas across products from the EU, according to a steel note written by representatives of the steel industry and reviewed by Reuters.

• "India's total guaranteed country-specific quota under the agreement is smaller than its current total entitlement, putting the country in an unfavourable position with regard to market access," the note submitted to the trade ministry, which is handling the EU negotiations, said.

• India's trade ministry did not respond immediately to a request for comment.

• Steel shipments above the quota will be subject to the EU’s 50% tariff, according to an analysis by India-based think tank Global Trade Research Initiative (GTRI) of the legal text of the agreement, which was released on Friday and could still be revised.

• The preferential quota does not exempt Indian steel from the EU's Carbon Border Adjustment Mechanism, which applies to all steel imports, and which GTRI estimates could average around 35% of the value once fully phased in.

• Most of India’s quota is allocated to flat-steel products, with hot-rolled sheets and strips receiving the largest allocation of 509,605 tons.

• The additional quota will become available once the India-EU FTA enters into force, expected by year end, and will remain subject to product coverage, rules of origin and quota availability.

(Reporting by Manoj Kumar; Editing by Kirsten Donovan and Toby Chopra)