India and the UK will discuss Britain's steel safeguard measure and carbon border adjustment mechanism (CBAM) on Tuesday (June 2, 2026) as these issues have become a sticking point in the implementation of the bilateral free trade pact, which was signed on July 24, 2025, government sources said.

They said that India may re-balance some duty concessions on certain products like Scotch Whiskey under the agreement with the U.K. if these issues do not get addressed.

The steel and the CBAM issues will figure prominently during the meeting between U.K. Secretary of State for Business and Trade Peter Kyle and Commerce and Industry Minister Piyush Goyal on June 2.

These issues have become a kind of sticking point in the implementation of the Comprehensive Economic and Trade Agreement (CETA).

From July 1, 2026, the U.K. will limit tariff-free steel imports, reducing overall quota volumes by 60% compared to the steel safeguard measure. Any imports above these levels will then face a 50% tariff.

The measure will apply to imports of steel products that can also be made in the U.K.. Earlier, Britain had safeguard measures that also imposed import quotas. The new measures reduce that quota.

The U.K. government in December 2023 also decided to implement its Carbon Border Adjustment Mechanism (CBAM) starting in 2027. According to economic think tank GTRI, India's exports worth $775 million to the U.K. may be impacted due to Britain's decision to introduce a carbon tax on products like iron and steel, aluminium, fertiliser and cement, from 2027.

The U.K., after the European Union (EU), will be the second economy to implement CBAM. It calls the move the import carbon pricing mechanism, and it will initially focus on sectors like iron, steel, aluminium, fertiliser, hydrogen, ceramics, glass, and cement.

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

During his visit to London in 2025, Commerce and Industry Minister Piyush Goyal flagged concerns over this tax and conveyed that India may consider retaliation if the U.K. goes ahead with the plan.

India's exports of iron and steel and their products to the U.K. stood at $893.4 million in 2025-26, accounting for a significant share of $13.4 billion in total merchandise exports to the U.K..

Sources also said that India could consider re-balancing the U.K.'s steel issue with British scotch concessions, offered by India in the CETA.

As per the pact, India has announced reducing the duty on U.K. whisky and gin from 150% to 75% and further to 40% in the 10th year of the deal.

In India, Scotch whisky brands such as Johnnie Walker, Chivas Regal, and The Glenlivet are the most popular. Among these, Johnnie Walker is one of the best-selling Scotches here.