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Obstacles in Steel Import
Context:
The Ministry of Steel’s implementation of non-tariff barriers (NTBs) for importing steel is posing significant challenges for manufacturers and service providers, particularly those involved in infrastructure development.
Ministry’s Measures
- One key hurdle arises from the government’s quality control orders (QCOs), which apply to approximately 800 items across various sectors, including consumer goods, construction materials, food products, chemicals, automotive parts, textiles, and metals such as steel.
- These measures aim to safeguard consumer interests by restricting imports to suppliers licensed by the Bureau of Indian Standards (BIS).
- However, this licensing requirement has deterred many foreign suppliers from participating in the Indian market, citing the complexity and time-consuming nature of the process.
- While exemptions exist for advance license holders, export-oriented units, and those in Special Economic Zones (SEZs), these are subject to specific conditions tied to export production.
- In addition to QCOs, the government has introduced several import monitoring systems, such as the Steel Import Monitoring System (SIMS), Paper Import Monitoring System (PIMS), and Non-Ferrous Metals Import Monitoring System (NFMIMS).
- Recently, the Ministry of Steel rolled out an updated version, SIMS-2, which adds further complexity for importers.
India’s Steel Sector
Current Status
- Production and Consumption: As of 2023, India produced approximately 140.2 million tonnes of crude steel, making it the second-largest steel producer globally, after China. The country also ranks as the second-largest consumer of finished steel, following China.
- Economic Contribution: The steel industry contributes about 2% to India’s GDP and employs around 2.5 million people directly and indirectly. Its output has a multiplier effect on the economy, significantly impacting related sectors such as construction, automotive, and engineering.
Historical Context
- Post-Independence Growth: The Indian steel industry saw significant expansion after independence in 1947. Key players like Tata Iron and Steel Company (TISCO) and Hindustan Steel Limited were established to meet domestic demand. The Steel Authority of India Limited (SAIL) was formed in 1973 to manage major steel plants.
- Expansion Over the Years: From producing just 16.9 lakh tonnes of pig iron in the early 1950s, India’s production has surged over the decades, with a notable increase of 75% since 2008.
Key Players: Steel Authority of India Limited (SAIL), Tata Steel, JSW Steel, AM/NS India and Jindal Steel & Power Limited.
Government Initiatives
National Steel Policy 2017: Aims for a crude steel capacity of 300 million tonnes by 2030, focusing on sustainable growth and enhanced domestic consumption.
Production Linked Incentive (PLI) Scheme: Encourages investment in specialty steel production, targeting an additional capacity of 42 million tonnes by 2026-27.
Quality Control Measures: The introduction of the Steel Quality Control Order aims to ensure that only high-quality steel products are available in the market.
Difficulties in Compliance:
- For steel items not covered by QCOs, they must obtain a no-objection certificate (NOC), which requires declaring that the specific grade of steel is unavailable domestically and cannot be substituted by alternatives.
- Many importers prefer obtaining inability letters from domestic manufacturers before submitting such declarations, delaying the NOC process.
- For items under QCOs, SIMS-2 mandates detailed technical information, such as product grade, category, chemical composition, and the supplier’s BIS license number (Company Master List or CML number).
- However, errors in SIMS-2 frequently occur because the master database is not updated, even when valid BIS licenses are provided.
- Without SIMS-2 registration, importers cannot file bills of entry, leading to penalties and demurrage due to delays in clearing shipments.
Impact on Industries:
- Steel is a vital raw material for engineering and construction, and delays in imports are disrupting production schedules and project execution.
- Import consignments often remain stuck at ports, awaiting SIMS-2 registration.
- Recognising the urgency, the Ministry of Steel recently waived the NOC requirement for shipments already at ports with bills of lading issued before December 4.
The Way Forward:
- While the government’s quality control measures aim to protect domestic consumers and industries, the current processes for obtaining NOCs and SIMS-2 registrations have created unnecessary bottlenecks.
- Simplifying procedures, ensuring timely database updates, and addressing systemic inefficiencies are crucial for reducing disruptions in steel procurement.
- Removing these obstacles will not only ease imports but also support critical infrastructure and manufacturing projects.
