Auto firms say steel import norms will delay manufacturing

14-Jan-2019

The auto industry has told the government it won’t be able to comply with new curbs on local manufacturers using imported steel, saying they need more time to adapt.

Foreign steel makers need to get Indian certification for high-grade steel products being used by Indian manufacturers. Although such steel comprises only a small portion of the total steel that goes into making vehicles, it is used for making important parts such as exhaust pipes and engines.

At a meeting this week, auto executives told government officials that the new steel import norms—a protectionist measure aimed at encouraging local steel makers—can delay manufacturing and are unrealistic, three people aware of the matter said. Indian steel makers do not manufacture special grade steel, leaving domestic auto companies to turn to South Korean and Japanese steel makes, who do not necessarily see the need to get Indian certification.

The industry sought at least a year’s time to comply with the new norms at a 7 January meeting with steel ministry officials. The meeting remained inconclusive, said the people cited above.

With the new steel import norms set to kick in on 17 February, after the ministry gave an extension of two months, automakers said they won’t be able to get approval for at least 20% of the total steel they import.

Indian manufacturers complain it will take at least six months to get certification for high-grade imported steel and that foreign manufacturers may not be interested in getting certification due to the low volumes involved.

The import control measure is aimed at protecting the domestic steel industry, which is laden with high debt.

On 20 June, the steel ministry issued a notification stating that steel items cannot be produced, sold, traded, imported or stocked unless they bear the Bureau of Indian Standards (BIS) mark. Foreign suppliers have to obtain BIS registration and domestic manufacturers have to get the certification mark licences.

“The automobile industry requires specialized steel for manufacturing engine parts, exhaust pipes, fuel systems and other parts which are imported and automobile companies have increased the usage of steel manufactured by local companies in the recent past. The government should understand that it’s a cumbersome task to get these foreign steel manufacturers to get BIS certification and it will take time. Hence the industry asked for a time for a year,” said the first person familiar with the matter, requesting anonymity.

Vinnie Mehta, director general, Automotive Components Manufacturers Association of India, said the order should not lead to disruption of either components production or vehicle manufacturing lines.

“The auto component industry firmly believes in indigenization and deepening of the value chain in the country. While trying to curb imports we need to be guided by rationale, since some very high grade steel, required for automotive manufacturing, is not available domestically,” said Mehta.

The second person who also spoke on condition of anonymity said that even if the local steel manufacturers start making the specialized grades of steel, it will take almost two years to validate and use it for production.

“Officials in the ministry asked the auto industry representatives to get these foreign manufacturers to set up shop in India, which is not possible at the moment,” this person added.

“The auto industry is a capital intensive industry and in no case will car manufacturers be able to accommodate short-term announcements and regulations,” said Puneet Gupta, associate director, IHS Markit.

Source: LIVEMINT