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The government has eased quality norms for importing steel and steel products for mega projects with over Rs 1,000 crore investment.

 

A notification issued by the ministry of commerce and industry said the government provided exemption to the import of steel and steel products for major industrial infrastructure projects from the applicability of Steel and Steel Products (Quality Control) Second Order, 2012. The exemption shall be available to projects in infrastructure, petroleum, manufacturing products involving high-end technologies, nuclear reactors, defence, chemical, petrochemicals and fertiliser sector projects.

 

The decision will increase steel imports into India affecting badly thereby local producers. Steel demand has continuously been lower for the last few years from local consumer industries due to the overall slowdown in investments in mega projects.

 

Since the cost of steel production is lower in China compared to India, and steel mills there have been continuously looking for opportunities to dump cheap products in India, the government's decision to exempt mega projects of specific quality of steel import would deepen local mills' crisis. Domestic mills will lose market to overseas companies resulting in lower capacity utilisation.

 

"The order provides exemption to large industries to import steel and steel products even if they are non-compliant with quality standards set out in the 2012 order. This will provide more avenues to large industrial consumers to import steel and would increase competition for domestic steel industry adding to the challenges being faced by domestic steel industry," said Pukhraj Sethiya, consultant (mining), PriceWaterHouse Coopers.

 

India imports five-six million tonnes (mt) of specialised steel every year, similar to the quantity the country exports. Total annual steel production is estimated to be 72 mt.

 

In September 2012, the government laid down sulphur and phosphorus contents in steel import. It also asked importers to mandatory register with the Directorate General of Foreign Trade. This hampered the transformer industry badly, which started importing complete transformer unit from overseas instead of manufacturing it locally, said D A Chandekar, an expert associated with the ministry of steel.

 

For imports, however, the government laid down strict conditions. Only the actual users can import on a project with a minimum investment of Rs 1,000 crore. Surplus, if any, cannot be disposed of in the domestic market without satisfying the quality standards applicable for domestic steel industry.

 

The order is expected to provide an opportunity to Chinese steel producers to further penetrate Indian Market, but impact would depend on requirements of consumer as well. Thus, it is early to say that China would be able to dump their products, said Setia.