Steel Import Restrictions Could Hamper Automobile Production in India

 Steel Import Restrictions Could Hamper Automobile Production
Steel Import Restrictions Could Hamper Automobile Production in India

The Indian automotive industry is going through a stress over the government imposing restrictions on domestic automotive manufacturers over using imported steel. It may be worth recalling that the steel ministry in a bid to promote local manufacturing had in June 2017 mandated Bureau of Indian Standards (BIS)-certified locally produced high-grade steel.

The ministry had set December 17, 2018 as the deadline to meet the new norms but was subsequently extended till February 17, 2019 after automakers were up in arms over the government move. In fact, auto companies sought an extension of the deadline until the end of 2019.

There is a great deal of unease in the Indian automotive industry over restrictions imposed on imported steel as there are apprehensions that the new regulations could disrupt the production of cars, government and industry. Even the automotive industry body - Society of Indian Automobile Manufacturers (SIAM) has been vocal about the restrictions on imported steel and has made its displeasure known in public domain.

In fact, Rajan Wadhera, President, Society of Indian Automobile Manufacturers (SIAM), said at a recent event that the import restriction issue needs to be sorted out at the earliest or else automotive production could get hampered.Automotive manufacturers have been voicing their reluctance to source locally produced source high-grade steel citing reservations over the quality and consistency of such locally produced steel.

It is important to understand that a large chunk of the steel requirements for the Indian automotive industry is catered to by domestic steel producers. Around 90 % of steel sourced for domestic automobile production, is manufactured in India. The rest 10 % of high grade steel that is used for meeting safety standards among others, is not manufactured in India and sourced through the import route largely because there is no economy of scale to manufacture these in India.

It remains to be seen whether the steel ministry softens its stand on restrictions on imported steel or else automotive production may come to a standstill.