If India wants its FTAs to complement rather than compromise its industrial strategy, the correction must begin with copper.

India’s copper trade has entered a phase of structural stress. Once balanced between domestic production and imports, the equation has shifted sharply as the country’s energy transition accelerates and demand rises across renewables, EVs, power transmission, construction and electronics. The International Copper Association India projects refined copper demand to cross 1.8 million tonnes in FY25, reflecting the scale of industrial transformation underway. But instead of this growth strengthening India’s domestic smelting and refining base, it is increasingly benefiting foreign producers through Free Trade Agreements (FTAs).

The India–UAE Comprehensive Economic Partnership Agreement (CEPA), signed in 2022, has emerged as a key pressure point that mandates a phased reduction in import duty on copper wire rods from 5 per cent at the time of signing to zero within five years. While lower duties were intended to deepen bilateral trade, the structure of CEPA’s Product Specific Rules (PSR) for copper wire rods has created a powerful incentive for exporters to qualify for origin through minimalistic processing rather than through genuine metallurgical transformation.

CEPA currently allows origin determination through either a “Melt, Cast and Rolled” (MCR) process or through a tariff-based rule requiring a change in tariff sub-heading (CTSH) combined with 40 per cent value addition. In practice, exporters have overwhelmingly chosen the MCR route. This enables refined copper cathodes, largely imported into the UAE from third countries, to be simply melted, cast and rolled into wire rods. The real economic value added through this activity is often less than one per cent, yet these products qualify as UAE-origin and enter India at near zero duty. The distortion was amplified by an erroneously high tariff rate quota of 85 KTPA (kilo tonnes per annum) in 2022, almost three times the actual domestic requirement of around 29 KTPA.

The ASEAN loophole: Cumulative origin without cumulative value

The challenge is not limited to the UAE. The India–ASEAN CEPA, signed in 2009, offers duty-free access for copper products from all ASEAN members. When the agreement was signed, ASEAN nations were expected to supply India with both raw materials and finished goods. That assumption no longer holds. Today, ASEAN economies are focused on building their own secure supply chains. Indonesia, for instance, banned copper concentrate exports from January 2025 to support its domestic smelting sector. In parallel, it expanded its smelting capacity dramatically, from 325 KTPA in 2020 to 837 KTPA in 2025. Once Indonesia converts ore to cathodes, these are shipped to countries such as Thailand, Malaysia and Vietnam, where they undergo minimal processing.

Despite the negligible transformation, cumulative value addition allows these products to qualify for duty-free access into India. This has led to a sharp rise in copper wire and copper tube imports into India between 2020 and 2024.

Adding another layer of complexity, Chinese firms have begun investing in ASEAN smelting assets, effectively gaining indirect duty-free access to the Indian market. Indian smelters, meanwhile, face higher concentrate procurement costs and do not have access to Indonesia’s ore, creating a non-level playing field.

Across both CEPA frameworks, both from the UAE and ASEAN side, India is increasingly receiving copper products that qualify for duty-free entry, not because they embody substantial value addition, but because they conform to permissive, shape-based rules of origin. This weakens India’s domestic ecosystem, risks long-term capacity erosion and ultimately threatens India’s strategic control over a metal central to its energy and manufacturing ambitions.

Policy clarity is the need of the hour

Therefore, correcting this trajectory requires policy clarity. For the UAE agreement, industry is calling for the removal of the melt-cast-roll rule and the retention of only the CTSH plus 40 per cent value-addition criterion, ensuring that preferential duty is tied to real transformation. The tariff quota must also be aligned to India’s actual requirement to prevent CEPA from becoming a routing hub for third-country copper. And for the ASEAN agreement, copper wires, tubes and foils need to be placed on the exclusion list in the ongoing FTA review so that cumulative value-addition rules cannot be misused to channel minimally processed products into India.

Thus, India’s FTAs cannot reward nominal processing when domestic industry must invest heavily to create real value. If India wants its FTAs to complement rather than compromise its industrial strategy, the correction must begin with copper. Only when rules of origin recognise substance over shape will trade policy truly align with India’s long-term economic interest.

The author is former secretary, Mines, Government of India

Published on January 3, 2026