Downstream steel producers protest govt's quality control move

14 August 2015

Protesting the government's move to control import under the garb of quality standard, downstream steel producers have urged the government not to implement Quality Control Order.

Downstream producers have urged the government not to implement a quality-control order for steel imports.

Downstream steel producers are dominated by small and medium enterprises that use 15 million tonnes (mt) of steel a year, procured from domestic and international sources. These sectors contribute 9 per cent of India's gross domestic products (GDP) and around 45 per cent of overall exports.

The ministry of steel had sought public comments on April 29, over banning the manufacture, sale, stocking and distribution of non-standard steel in India. The order seeks registration of steel producers with the Bureau of Indian Standards (BIS) and certification of the quality they deal in. Substandard steel is to be disposed of as scrap.

“Through this order, primary producers are trying to restrict imports with an aim of creating a shortage. The government is helping them in their efforts,” said Nikunj Turakhia, administrative director of the Bombay Iron Merchants’ Association.

Large steel producers in India include Tata Steel, Essar Steel, Jindal Steel & Power, Steel Authority of India and JSW Steel. Total steel imports into India were up nine mt in 2014-15, from six mt in the previous year. India uses 95 mt of steel a year, and imports constitute only nine per cent.  Sandeep Parekh, vice-president of the Thane Small Scale Industries’ Association, asked, “How can nine per cent of steel imports affect domestic sales?”

Local manufacturers are selling steel (HR Coil) at $80-100 (Rs 6,000-7,000) a tonne higher than its landed cost in the country.  Sanjiv Mehta, chief executive of Shah Brothers Ispat, said, “Indian exporters will lose their advantage due to high input costs.”

“The myth that imported steel does not conform to global quality standards is not true. In fact, wire manufacturing capacity is insufficient in India and, hence, downstream producers do not have an option but to import,” said Vijay Vedmutha, chairman of the Steel Wire Manufacturers’ Association of India.

Many downstream producers believe the BIS does not have facilities to register hundreds of thousands of small steel enterprises. Kobe Steel of Japan applied for a BIS registration 18 months ago and is yet to receive it. Vedmutha said a BIS registration normally took 12-18 months.

“This is an attempt by the government to close downstream steel mills,” said Ashraf Chitalwala, director of Zarhak Steels. Members of the downstream industry were of the view that primary steel producers were adequately protected by higher import duty.