India seeks CBAM leeway, larger steel access as EU trade pact talks enter final stretch

India has intensified efforts to clinch key concessions from the European Union on climate-related trade measures and market access, as negotiations for the long-pending India–EU Free Trade Agreement move into a crucial phase.

People familiar with the discussions said New Delhi is pressing Brussels for flexibility in the implementation of the EU’s Carbon Border Adjustment Mechanism (CBAM). India wants the EU to acknowledge alternative compliance options that take into account its domestic carbon-reduction efforts, including energy taxes and ongoing climate initiatives. At the same time, India is seeking higher duty-concessional quotas for steel exports to the European market.

A senior Indian negotiating team is currently in Brussels, with Commerce and Industry Minister Piyush Goyal expected to join them shortly to add political momentum to the talks. Officials on both sides are aiming to push the agreement “substantially closer to conclusion” this month, with the possibility of announcing tangible progress during the upcoming visit of European Commission President Ursula von der Leyen and European Council President António Costa to India for the Republic Day celebrations.

During the visit, Goyal is slated to hold high-level discussions with EU Commissioner for Trade and Economic Security Maroš Šefčovič. According to an official statement, these engagements are meant to provide strategic guidance, iron out unresolved issues, and accelerate work towards a balanced and ambitious trade agreement.

CBAM has emerged as a major sticking point for India. The mechanism, introduced by the EU to prevent carbon leakage, seeks to equalise the carbon costs borne by EU producers under the Emissions Trading System (ETS) with those faced by foreign suppliers. It applies to carbon-intensive products such as steel, aluminium, cement and fertilisers.

Industry assessments indicate that Indian exporters of steel and aluminium may need to lower prices by 15–22 per cent to offset the additional carbon-related costs and stay competitive in the EU market. The absence of a carbon pricing regime in India comparable to the EU ETS has placed exporters at a structural disadvantage.

While EU officials are not expected to offer blanket exemptions from CBAM, sources said India is pushing for provisions within the FTA that would allow alternative compliance routes, including formal recognition of India’s domestic mitigation measures. India is developing a rate-based emissions trading framework, with its Carbon Credit Trading Scheme slated for phased rollout from 2026.

CBAM’s financial phase began on January 1, 2026, requiring EU importers of covered goods to buy certificates corresponding to the embedded carbon emissions of those imports.

Beyond climate issues, India is also seeking an expansion of reduced-duty steel import quotas. One option under discussion involves redistributing unused quotas from other supplier countries in India’s favour, sources said.

For the EU, enhanced access to the Indian market—particularly in automobiles and dairy products—remains a central demand, with the bloc pushing for deeper tariff cuts in these sectors.

India–EU merchandise trade reached $136.53 billion in 2024–25, with Indian exports accounting for $75.85 billion and imports at $60.68 billion, making the EU India’s largest trading partner for goods, according to official data.

Both sides are keen to finalise the agreement at the earliest, driven by growing uncertainty in global trade and the impact of higher tariffs imposed by the United States.