Steel quality control order duplicative and hurts MSMEs, says GTRI

Hours after a Quality Control Order (QCO) was issued for steel imports in June, a major domestic stainless steel producer hiked prices sharply, as it had allegedly already secured quality clearances for its foreign suppliers before the new rule came into force, think tank Global Trade Research Initiative (GTRI) said in a report on Tuesday

 

The QCO issued by the steel ministry on June 13 that mandated certification from the Bureau of Indian Standards (BIS) for raw materials, has locked thousands of smaller firms out of the market while giving larger players an edge, GTRI has argued. Micro, Small and Medium Enterprises (MSMEs) that depend on imported semi-finished steel in sectors like auto components, precision engineering, and construction, are facing shipment delays, demurrage costs and cancelled contracts.

   

While the Madras High Court granted an interim stay on the order on July 17, the Steel Import Monitoring System (SIMS) portal still requires BIS certificate details, prolonging supply chain disruptions. The Steel Ministry, which has defended the order, saying it ensures parity between domestic producers and importers and prevents dumping of sub-standard steel, has moved the Supreme Court last week against the HC stay order.

 

The GTRI said the rule is “duplicative, impractical and harmful to trade” as the BIS already audits overseas factories and verifies raw materials under the Foreign Manufacturer Certification Scheme (FMCS). The QCO could be interpreted as a non-tariff barrier under World Trade Organisation (WTO) rules, it noted.

 

“The primary value of certification lies in the final product that reaches the end user, not at every stage of the production process,” GTRI’s report pointed out, adding that major economies like the United States, European Union and Japan do not require separate raw material certification if the final product meets quality standards.

 

The report also flagged potential market distortion, citing exemptions for finished products like welded pipes, which appear to favour value-added imports over domestic manufacturing. GTRI has pitched for an immediate suspension of the QCO, stakeholder consultations, exemptions for inputs verified under FMCS, and a 90-day transition period for future regulatory changes. 

A senior official at the Steel Authority of India Limited (SAIL) said there have not been any price changes effected by SAIL linked to the June 13 Quality Control Order. 

 

SAIL’s Salem steel plant Executive Director P.K. Sarkar clarified that so far as SAIL is concerned, prices of stainless steel are routinely reviewed on a monthly basis, based on the cost of production. 

Jindal Stainless Sales and Distribution Head Rajeev Garg told Business Standard, "Our pricing policy is rooted in long-established market principles and is reviewed periodically in line with input costs, demand and supply dynamics. And, after the implementation of QCO, there has been no change in our prices. We are committed to transparency in all our commercial practices and are always in regular dialogue with our customers and partners to address and clarify any concerns."