Indian govt clarifies rationale for mandatory BIS compliance for imported steel input materials

The Ministry of Steel has issued a clarificatory notification related to its latest mandate for BIS standards for intermediate material in the manufacturing of final steel products. The notification attempts to underline the rationale for the mandate, as well as allay fears concerning the impact on MSMEs and domestic steel prices.

As an important part of the clarification, the MoS highlighted that as the ”Integrated Steel Plants… make intermediate products and finished products themselves, and the BIS licence has been issued to them taking into account the whole process”. They will not need to have “different licences for all stages as the BIS certification process takes care of the whole manufacturing chain”.

The Ministry of Steel will issue clarifications in this regard after verification from BIS for such integrated steel plants.

Parity for domestic producers: While Indian steel manufacturers had to use only BIS Standard compliant intermediate material, no such requirement was felt by importers of steel products. ”It will be wrong to put domestic steel products manufacturers at a comparative disadvantage vis-à-vis imported products in terms of non-BIS compliant intermediate input products,” the notification states.

Compliance of BIS Standards for intermediate product is required to ensure that finished product is as per quality requirement given by BIS Standards, it added.

Restricting imports of ‘substandard steel’ products: Excess capacity and declining consumption in major economies make India vulnerable to cheap, substandard steel imports. ”As India is the only fast-growing large economy in the world, there is a very high possibility of cheap steel getting pushed into Indian market unless adequate measures are put in place for import of quality steel,” the MoS Order states.

Moreover, ”because of sectoral tariffs, Tariff Rate Quotas (TRQs) etc. and safeguard measures adopted by other countries, the possibility of dumping of cheap substandard steel into India further increases,” it notes, adding that it ”will have an extreme adverse impact on the domestic steel industry and especially the small steel industries in the country”.  

Price hike fears ‘unfounded’:  According to the notification, India has a steel manufacturing capacity of 200 mnt which is enough to meet domestic demand. Hence no possibility of price increase seems to be there after the mandate on BIS compliance for imports of input materials comes into force.

India is the only major economy, where steel consumption is growing at above 12% for the last three years. According to the MoS, the country will need about 300 mnt of steel capacity by 2030 and 400 mnt by 2035.

”This capacity creation will require capital infusion of approximately US $ 200 billion by 2035. If substandard cheap steel imports affect the domestic steel industry (both integrated steel producers and small steel industries) their capacity to infuse this capital will come into terrible strain and the capacity expansion plans of steel industry will be adversely affected.”