India-EU trade deal: a 1.64 million tonne steel quota for India, a car quota for the EU
India sends about 4 million tonnes of steel to Europe a year. Only 1.64 million tonnes get a quota. What about the rest?
Published 14 September 2026. Written by Pratidin from the reports linked at the end; every fact checked by a separate review before publishing. How we work
The Indian Express reported on 14 September 2026 the fine print of the India-European Union Free Trade Agreement (FTA) on two sensitive goods, steel and cars. The negotiations, relaunched on 17 June 2022, were concluded on 27 January 2026; the European Commission presented the agreement to the Council of the EU on 11 September 2026, a step towards signature. The Commission has published the texts, which it says are for information and may change during legal revision. On steel, the report says India gets an annual quota of 1.64 million tonnes (mt) for exports to the EU: 0.69 mt as an FTA-specific component and 0.95 mt as a Most Favoured Nation (MFN) component. India's steel exports to the EU are about 4 mt a year, so a large share will still face duties or compete for other quotas. The published texts include an annex (Annex 2-B) on steel tariff-rate quotas.
On cars, the Commission's factsheet says India's tariff of up to 110% on EU motor vehicles falls to 10% within a quota of 2,50,000 vehicles. According to the report, the first-year tariff-rate quota (TRQ) is 1,00,000 completely built-up cars, about six times current imports, and concessions apply only to cars priced above €15,000, shielding India's cheaper segment. Electric vehicles and plug-in hybrids get concessions only from the fifth year, and only above €20,000. The Global Trade Research Initiative (GTRI) is quoted as saying the EU is the second major partner, after the UK, to win automobile tariff concessions from India. Overall, the Commission says tariffs will be cut or removed on 96.6% of EU goods exports to India, and that EU exports to India were worth about €75 billion in 2024 (€48.8 billion goods, €26 billion services).
The steel quota matters because two EU measures now shape Indian steel exports. The first is the Carbon Border Adjustment Mechanism (CBAM), whose definitive phase began on 1 January 2026: importers of iron and steel, cement, aluminium, fertilisers, electricity and hydrogen must buy CBAM certificates matching the carbon emitted in making those goods. The second, according to the report, is a new EU regime against global steel overcapacity that took effect on 1 July 2026. The report cites a recommendation by the Indian Council for Research on International Economic Relations (ICRIER) that Indian mills shift to higher value-added steel products to reduce the CBAM burden. For India, the bargain is wider access to the EU market against a guarded opening in cars; for steelmakers, the question is whether 1.64 mt of quota is enough.
Prelims facts
- India-EU FTA negotiations were relaunched on 17 June 2022 and concluded on 27 January 2026; the Commission presented the deal to the EU Council on 11 September 2026.
- Under the deal India gets an annual EU steel quota of 1.64 million tonnes (0.69 mt FTA-specific and 0.95 mt MFN), against exports of about 4 million tonnes.
- India's tariff of up to 110% on EU cars falls to 10% within a quota of 2,50,000 vehicles; the first-year quota is 1,00,000, only for cars above €15,000.
- The EU's Carbon Border Adjustment Mechanism entered its definitive phase on 1 January 2026 and covers iron and steel, cement, aluminium, fertilisers, electricity and hydrogen.
- A tariff-rate quota allows a set volume of imports at a lower tariff; imports beyond it pay the higher rate.
Quick recall
- When were India-EU FTA negotiations concluded?
- 27 January 2026 (relaunched on 17 June 2022).
- When did the European Commission present the India-EU FTA to the EU Council?
- 11 September 2026.
- India's annual steel quota in the EU under the FTA, as reported?
- 1.64 million tonnes: 0.69 mt FTA-specific and 0.95 mt MFN.
- India's tariff on EU cars within the FTA quota?
- 10%, down from up to 110%, within a quota of 2,50,000 vehicles.
- Minimum price for EU cars to get the FTA concession, as reported?
- Above €15,000.
- When do EU electric vehicles get concessions under the deal, as reported?
- From year five, and only above €20,000.
- When did CBAM's definitive phase begin?
- 1 January 2026.
- Six sectors covered by CBAM?
- Cement, iron and steel, aluminium, fertilisers, electricity and hydrogen.
Prelims practice question
In the context of international trade, a 'tariff-rate quota' means:
- A ban on imports beyond a fixed quantity
- A lower tariff on imports up to a fixed quantity, and a higher tariff on imports beyond it
- A tariff fixed as a percentage of the importing country's GDP
- A quota on the number of countries that can export a product
Show answer
Answer: (b) A lower tariff on imports up to a fixed quantity, and a higher tariff on imports beyond it. A tariff-rate quota (TRQ) combines a quota and two tariff rates: imports within the quota pay a lower rate and imports above it pay a higher rate. It does not ban imports beyond the quota. India's car quota for the EU and India's steel quota in the EU both work this way.
Use this in UPSC Mains: previous-year questions
Recurring theme: Free trade agreements, protectionism and India's trade with the European Union
- How to use this
The India-EU FTA shows India turning to bilateral deals while guarding sensitive sectors through quotas, and CBAM shows the protectionist pressures its exporters still face.
- The India-EU FTA, concluded on 27 January 2026, cuts or removes tariffs on 96.6% of EU goods exports to India, per the Commission; it was presented to the EU Council on 11 September 2026.
- India's tariff of up to 110% on EU cars falls to 10% only within a 2,50,000-vehicle quota, with first-year concessions only for cars above €15,000, shielding the mass market.
- Indian steel gets only a 1.64 mt quota against exports of about 4 mt and faces CBAM (definitive since 1 January 2026); ICRIER suggests a shift to higher value-added steel.
- How to use this
EU carbon border and steel overcapacity measures are current forms of protection that squeeze Indian exports, affecting trade balance and growth.
- The EU's CBAM entered its definitive phase on 1 January 2026, requiring importers of iron and steel, cement, aluminium, fertilisers, electricity and hydrogen to buy certificates for embedded carbon.
- A new EU regime against global steel overcapacity took effect on 1 July 2026, and India's FTA steel quota of 1.64 mt is well below its exports of about 4 mt.
- Response: ICRIER recommends higher value-added steel to cut the CBAM burden; also cut emissions and seek recognition of Indian carbon prices.
The Broad-based Trade and Investment Agreement was the earlier name of the India-EU trade talks that have now produced this FTA.
Mains practice question
The India-EU Free Trade Agreement uses tariff-rate quotas for both steel and automobiles. Discuss how such quotas balance market access with protection, and examine the challenges for Indian steel exports to the EU. (250 words)
Model answer
The India-EU Free Trade Agreement, concluded on 27 January 2026 and presented to the EU Council on 11 September 2026, opens most trade but handles sensitive goods through tariff-rate quotas (TRQs): lower tariffs up to a fixed volume, normal tariffs beyond it.
How TRQs balance access and protection
- Cars (India's side): tariffs of up to 110% fall to 10%, but only within a quota of 2,50,000 vehicles; the first-year quota is reported at 1,00,000 cars above €15,000, protecting India's mass market.
- EVs: concessions only from year five and above €20,000, giving Indian EV makers time.
- Steel (EU's side): India gets a reported 1.64 mt quota (0.69 mt FTA-specific, 0.95 mt MFN) under the EU's steel regime.
- TRQs let each side open up gradually and politically defend the deal at home.
Challenges for Indian steel
- Volume gap: exports of about 4 mt exceed the 1.64 mt quota.
- CBAM: since 1 January 2026, EU importers must buy certificates for carbon embedded in steel, so emission-intensive producers pay more.
- EU overcapacity measures: a new EU steel regime from 1 July 2026 tightens access.
- Competition: other exporters compete for the non-FTA share.
Way forward
- Move to higher value-added steel, as ICRIER suggests.
- Cut emissions through green hydrogen, scrap-based production and India's Carbon Credit Trading Scheme, and seek recognition of Indian carbon prices.
- Use the FTA's review mechanisms to seek larger quotas.
Quotas buy time for sensitive sectors; India must use that time to make its steel both cleaner and more competitive.
The basics
Why this matters
Free trade agreements rarely open everything at once. For goods that a country considers sensitive, negotiators use a Tariff-rate quota: a fixed volume enters at a low tariff, and anything more pays the normal rate. The India-EU deal uses this tool twice, for European cars entering India and for Indian steel entering Europe. Steel also runs into the EU's Carbon Border Adjustment Mechanism.
How a tariff-rate quota works
- 1Quota is fixedThe agreement sets a volume, for example 1,00,000 EU cars in the first year.
- 2Imports within the quotaThey pay the lower, agreed tariff, 10% in the case of EU cars.
- 3Quota fills upCustoms tracks imports against the quota during the year.
- 4Imports beyond the quotaThey pay the normal tariff, up to 110% for cars in India's case.
Two quotas, two directions
- Tariff of up to 110% cut to 10% within the quota
- Full quota of 2,50,000 vehicles; first-year quota reported at 1,00,000
- Only cars priced above €15,000
- EVs and plug-in hybrids only from year five, above €20,000
- Annual quota of 1.64 million tonnes reported for India
- 0.69 mt FTA-specific plus 0.95 mt MFN component
- Indian exports to the EU are about 4 million tonnes
- Also subject to CBAM from 1 January 2026
The carbon layer
Since 1 January 2026, EU importers of steel must buy certificates for the carbon emitted in making it. That puts a price on carbon-intensive steel, whatever the tariff. The quota itself is split into an FTA-specific part and a part described as an MFN component, a term that comes from the WTO's Most Favoured Nation treatment rule.
The takeaway
Quotas protect politically sensitive industries while letting trade grow. For India, the car quota protects its cheaper car market; for Europe, the steel quota protects its mills. The long-term answer for Indian steel is lower emissions and higher value.
Go deeper
In one line: The India-EU FTA gives India a reported 1.64 million tonne steel quota in the EU and gives EU carmakers a quota of cars at a 10% tariff in India, protecting sensitive industries on both sides.
Why it matters for UPSC
The India-EU FTA is one of the most closely watched trade deals India has negotiated. Prelims asks about trade terms (TRQ, MFN, CBAM); Mains GS2 and GS3 ask about FTAs, protectionism and the effect of carbon border taxes on Indian exports.
The core idea
Both sides use a Tariff-rate quota for goods they consider sensitive. India's quota in the EU has two parts, one tied to the FTA and one to Most Favoured Nation treatment. On top of any tariff, Indian steel in the EU now carries the cost of the Carbon Border Adjustment Mechanism.
Numbers and dates to remember
- 17 June 2022: talks relaunched; 27 January 2026: talks concluded.
- 11 September 2026: Commission presents the deal to the EU Council.
- Steel: 1.64 mt quota (0.69 mt FTA, 0.95 mt MFN) against exports of about 4 mt.
- Cars: 110% to 10% within 2,50,000 vehicles; first year 1,00,000 above €15,000.
- CBAM definitive phase from 1 January 2026.
Where to go next
- Tariff-rate quota: how a quota with two tariffs works
- Most Favoured Nation treatment: the WTO's non-discrimination rule
- Carbon Border Adjustment Mechanism: the EU's carbon charge on imports
Go deeper: is the steel quota a win or a ceiling?
The case that India gained. A country-specific quota of 1.64 mt, part of it tied to the FTA, gives Indian exporters a defined volume in a market that is tightening its steel rules. The Tariff-rate quota on cars, meanwhile, lets India open its car market to Europe slowly, only above €15,000 and with EVs held back for five years.
The case that it is a ceiling. Indian steel exports to the EU are about 4 mt, so the quota covers well under half. The Carbon Border Adjustment Mechanism adds a carbon cost on every tonne, inside or outside the quota. And only 0.69 mt of the quota is described as FTA-specific; the rest is an MFN component, a term rooted in Most Favoured Nation treatment.
What experts suggest. ICRIER, as cited in the report, recommends shifting to higher value-added steel to reduce the CBAM burden. GTRI notes that the EU is only the second partner, after the UK, to get car tariff concessions from India, showing how guarded India remains on autos.
The bigger picture. The Commission says tariffs will fall on 96.6% of EU goods exports to India. The deal is broad; the quotas show where each side drew its red lines.
Tariff-rate quota
How a quota with two tariffs works
In one line: A tariff-rate quota lets a fixed volume of imports enter at a lower tariff, while imports above that volume pay a higher tariff.
How it works
A TRQ is not a ban. It has three parts: the quota volume, the in-quota tariff and the out-of-quota tariff. Once the quota for the period is used up, further imports are still allowed but at the higher rate. Governments use TRQs to open a sensitive market in a controlled way.
In the India-EU deal
India's tariff of up to 110% on EU cars falls to 10% within a quota of 2,50,000 vehicles, with a first-year quota reported at 1,00,000 cars priced above €15,000. In the other direction, India gets a reported annual steel quota of 1.64 million tonnes in the EU. The published FTA texts include an annex on steel TRQs (Annex 2-B).
Where to go next
Most Favoured Nation treatment
The WTO's non-discrimination rule
In one line: Most Favoured Nation (MFN) treatment is the WTO rule that a trade advantage given to one member must be given to all members.
The rule
Despite its name, MFN is about equal treatment, not special favours. It is the first article of the General Agreement on Tariffs and Trade. A country's normal tariffs are its 'MFN tariffs', charged on imports from every WTO member.
The exception for FTAs
Free trade agreements are allowed to break MFN: partners can give each other lower tariffs than they give the rest of the world. That is why the India-EU deal can create advantages only for each other.
Why it is in the news
India's reported 1.64 million tonne steel quota in the EU has two parts: 0.69 mt as an FTA-specific component and 0.95 mt described as an MFN component.
Where to go next
Carbon Border Adjustment Mechanism
The EU's carbon charge on imports
In one line: CBAM is the EU's charge on the carbon emitted in producing certain imported goods, so that imports face a carbon cost similar to goods made inside the EU.
How it works
A transitional phase ran from 2023 to 2025, when importers only reported emissions. The definitive phase began on 1 January 2026. Importers must now be authorised, report emissions and buy and surrender CBAM certificates matching the carbon embedded in their imports. It covers cement, iron and steel, aluminium, fertilisers, electricity and hydrogen.
Why it matters for India
A tariff cut under the FTA does not remove the CBAM charge on steel. ICRIER, as cited in the Indian Express, suggests that Indian mills move to higher value-added products to reduce the burden.
Where to go next
Carbon Border Adjustment Mechanism: every story that connects to it (4)
Take the 14 September 2026 quiz: 30 Prelims-style questions with answers