BIS Certification for Chinese Steelmakers – Addressing India's CRGO Steel Shortage

The Bureau of Indian Standards (BIS) is set to issue compliance certificates to three Chinese steelmakers for the first time, addressing the critical shortage of Cold Rolled Grain Oriented (CRGO) steel in India. This decision marks a significant step in bridging the gap between demand and supply for this specialized steel grade, vital for sectors like aerospace, automotive, and energy. Below is an analytical assessment of the situation.

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Background and Context

1. CRGO Steel Overview: CRGO steel is a specialized alloy steel essential for manufacturing transformers, motors, and other critical components. Its unique properties, such as high permeability and reduced core losses, make it indispensable in energy transmission and high-efficiency applications.
2. India’s Domestic CRGO Production: India produces only 7% of its CRGO steel demand, with the remainder being imported. The total domestic demand for CRGO stands at approximately 300,000 tonnes annually, while the local supply falls short of meeting this demand.
3. Policy Framework: In October 2023, the government tightened quality norms, making BIS certification mandatory for CRGO imports and requiring the Union Steel Ministry’s approval for uncertified imports. BIS certification involves rigorous evaluation of steel mills outside India, ensuring adherence to quality standards.

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Drivers of the Decision to Certify Chinese Steelmakers

1. Domestic Shortage: The domestic production of CRGO steel is insufficient, forcing manufacturers, especially in the transformer sector, to rely on imports. This shortage has been flagged repeatedly by stakeholders.
2. Global Production Capacity: The three Chinese steelmakers under certification have a combined capacity exceeding 17 million tonnes, dwarfing India’s annual demand of 300,000 tonnes. Their inclusion can ease the supply constraints significantly.
3. Strategic Importance of CRGO: CRGO steel is critical for India’s infrastructure growth, particularly in power generation and transmission. Addressing the supply deficit is essential to avoid disruptions in key industries.
4. Impact of Stringent Import Norms: The October 2023 policy requiring BIS certification created bottlenecks, delaying imports and affecting industries reliant on CRGO steel. The certification of Chinese producers is a pragmatic response to alleviate these constraints.

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Implications of BIS Certification

Positive Impacts

1. Supply Chain Stability: Certifying Chinese steelmakers will immediately alleviate the CRGO shortage, ensuring the smooth operation of industries like energy, automotive, and aerospace.
2. Cost Efficiency: Increased availability may lead to competitive pricing, benefiting transformer manufacturers and other downstream users reliant on CRGO steel.
3. Quality Assurance: BIS certification ensures that imported CRGO steel meets India’s stringent quality standards, enhancing the reliability of critical infrastructure.

Challenges and Concerns

1. Dependency on Imports: While addressing the immediate shortage, this move may deepen India’s dependency on imports for high-value steel grades, potentially weakening long-term domestic capabilities.
2. Competitiveness of Domestic Producers: The influx of certified CRGO steel from Chinese manufacturers could create pricing pressures for Indian producers, discouraging investment in local capacity-building.
3. Geopolitical Concerns: Given the complex trade dynamics between India and China, increased reliance on Chinese steelmakers may face scrutiny.

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Strategic Recommendations

1. Strengthening Domestic Production: Incentivize Investments: Offer subsidies or tax benefits to Indian manufacturers investing in CRGO production technology. R&D Support: Establish dedicated research programs to develop advanced steel grades like CRGO.
2. Diversification of Import Sources: To reduce dependency on any single country, explore imports from other CRGO-producing nations like Japan and South Korea.
3. Balancing Imports and Domestic Growth: Introduce a phased approach where imports supplement domestic production rather than substitute it. Implement policies encouraging joint ventures between Indian and global steelmakers to develop local capabilities.
4. Quality Control Streamlining: Expedite the BIS certification process to avoid delays that disrupt industries.

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Conclusion

The BIS decision to certify Chinese steelmakers addresses a pressing need for CRGO steel in India but raises critical questions about long-term strategies for self-sufficiency and industrial competitiveness. While this move will stabilize the short-term supply chain and benefit key industries, a broader, strategic focus on domestic production capacity, diversification of import sources, and policy alignment is essential for sustainable growth in the Indian steel industry.

India must seize this opportunity to bolster its CRGO manufacturing ecosystem, ensuring that reliance on imports is a stepping stone toward self-reliance rather than a long-term dependency.

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