India and UK in talks on Britain's carbon tax rules: Commerce Secretary Rajesh Agrawal

New Delhi: India and the UK are engaged in discussions on Britain's carbon tax regulation, commerce secretary Rajesh Agrawal said, assuring that India has been able to preserve market access for the domestic steel sector in the free trade agreement, which comes into force on Wednesday.

The carbon border adjustment mechanism (CBAM) was a sticky issue during the negotiations of the India-UK Comprehensive Economic and Trade Agreement (CETA).

"CBAM is a regulation which is under work. It has yet not come to fruition. Both sides are engaged in discussing CBAM regulation," Agrawal said on Tuesday.

The tax could range from 14-24% of the import value on full phase-out of free allowances under the Emission Trading System (ETS).

India exported $893.4 million of iron and steel and their products to the UK in 2025-26. "We have been able to preserve the market access (for the domestic steel sector) in terms of value that we have enjoyed till now... our quotas in the steel sector are comparatively higher compared to other trading partners of the UK," he said.

Around 80% of India's steel exports across about 100 tariff lines will continue to enjoy zero-duty access, while the remaining 20% will be covered under the negotiated quotas, which he said are sufficient to maintain and potentially expand exports.

India's steel exports to the UK could rise to $1 billion in FY27, officials said.

Gold standard FTA

Terming the CETA as the "gold standard" and one of the "most ambitious and aspirational free trade agreements", Agrawal said it is the first pact of its kind because of its wide sectoral coverage and deep reduction in both tariff and non-tariff barriers.

Read More: India-UK FTA comes into effect today, unlocking duty-free access for Indian exports

As part of the deal, 98% of goods from India can enter the UK without any duty from Wednesday.

On the other hand, India will immediately eliminate tariffs on 30.3% of the trade value, with 47% more seeing tariffs eliminated in a phased manner. It will also provide reduced quota-based tariffs on 12.1% of the trade value. In total, this will cover 89.5% of tariff lines and 89.4% of trade value.

India-UK goods trade amounted to $25.12 billion in 2025-26 and services trade totalled $35.44 billion in 2024.

"The target is that in the next three-four years, we will be able to reach $100 billion," Agrawal said.

He said that the CETA comprehensively covers sectors and deeply cuts tariffs and non-tariff barriers, as duties as high as 12% are being eliminated.

Sectoral gains

India's labour intensive sectors such as garments, textiles, footwear, carpets, processed foods, cereals, fruits, vegetables, spices, fish and meat products will now enter the UK duty-free, replacing tariffs that previously ranged between 4-16%. This will help India to garner a higher share of the UK market in products such as tobacco cigarettes, man-made fibre jerseys and synthetic trousers.

Sensitive products such as fresh apples, walnuts, whey, modified whey, blue-veined cheese, selected seed varieties, gold bars and smartphones have been exempted from tariff concessions by India. The UK has excluded chicken, pork, rice and sugar from the CETA.

Silver

Britain is India's largest supplier of refined silver, with a 45.4% share of total silver-bar imports. So far, India had imposed 15% on silver, comprising a 10% basic customs duty and a 5% agriculture infrastructure and development cess.

"There are stringent rules of origin for silver," Agrawal said.