India-UK FTA to boost aluminium exports as carbon tariffs pose challenge

FTA could triple aluminium exports to the UK by 2030, while R&D collaboration may enable extraction of critical minerals from aluminium by-products

The recently signed India-United Kingdom (UK) free-trade agreement (FTA) could treble Indian aluminium export to the other signatory nation by 2030, even as the UK’s Carbon Border Adjustment Mechanism (CBAM), effective January 2027, threatens to nullify these gains, according to experts and industry leaders.

 

India’s aluminium sector is poised for a boost under the FTA, which eliminates the UK’s import duties previously ranging from 2 per cent to 10 per cent.

 

“With the FTA now in place, the aluminium industry aims to treble its export to the UK by 2030 from the current 21 kilotonnes per annum (KTPA), worth $93 million, to approximately 65 KTPA, valued at around $220 million,” said Rajiv Kumar, chief executive officer, Vedanta Aluminium.

 

However, the CBAM could nullify these gains. “It could impose a carbon-related duty burden exceeding 50 per cent, making export from high-emission producers economically unviable. It has the potential to offset the benefits gained through the FTA’s tariff concessions,” he said.

 

Analysts say the CBAM could impose tariffs of 14-35 per cent, translating into roughly $150 per ton of carbon dioxide.

 

“The FTA failed to get a carbon-tax exemption, so I think that is one challenge that must be addressed,” said Rajib Maitra, partner, Deloitte.

 

Kumar also said duty-free access under the FTA made aluminium products more attractive in some sectors.

 

“Given the UK’s portfolio of diverse aluminium consumption, Indian producers are well positioned to tap into several high-potential segments such as construction, automotive components, food-and-beverage packaging, and renewable-energy infrastructure, particularly power transmission,” he said. 

 

The trade data shows India primarily imports scrap aluminium from the UK. In 2024-25, India imported aluminium worth ₹3,244 crore, of which 86 per cent comprised the value of scrap aluminium, while it exported aluminium worth ₹794 crore, comprising mostly value-added products.

 

The FTA also opens up avenues for research & development collaboration, particularly in utilising aluminium byproducts.

 

“Red mud, a byproduct of alumina processing, contains critical minerals such as gallium, titanium, and vanadium. India produces about 9 million tonnes of red mud annually. Aluminium dross also offers potential for recycling and extraction of critical minerals,” said Maitra.

 

Experts say policy intervention is crucial in ensuring the FTA’s benefits are realised.

 

“Aluminium could be granted core-sector status, a domestic carbon pricing and trading mechanism could be implemented to align with CBAM compliance, and financial incentives, along with technology upgrade, could be extended to micro, medium, and small enterprises in downstream aluminium,” Maitra said.

 

He also said the framework for certifying green aluminium, similar to standards on green steel, should be developed to define, promote, and certify low-carbon aluminium production, complemented by export-incentive schemes to strengthen India’s competitiveness in global markets.