By Prasenjit Bhattacharya
There’s more to India’s steel sector than big corporate house like Tata and Jindal.
In fact, more than half of the national output comes from small factories spread across the country. They are the ones who make iron rods and bars used for building houses, shovels, hoes and small industrial machinery.
This underbelly of steel making is worried they’ll run out of business if the central government goes through with plans to tighten quality norms on steel production starting Sept. 12.
India is the fourth-largest steel producer globally, after China, Japan and the U.S.
While big producers make steel by heating iron ore and coking coal in large blast furnaces, smaller manufacturers take a different approach. They typically melt iron scraps from old ships and junkyards in India and overseas to make lower grades of steel used to make construction materials, farm equipment and industrial products.
The government has dusted off a six-year old order and decided to ensure thousands of smaller factories make steel according to regulations laid down by the Bureau of Indian Standards. While the order has existed in paper, so far it has not been implemented.
“It’s very difficult for smaller companies to make investments for reducing the levels of phosphorus and sulphur in our steel according to BIS norms. It will make most of the smaller players shut shop,” S.C. Mathur, executive director of lobby group Cold Rolled Steel Manufacturers Association told India Real Time.
The government feels the industry has been aware of its desire to bring in BIS norms for a long time and most steelmakers have upgraded their facilities. The industry disagrees, saying very few of the secondary steelmakers have upgraded because of the cost.
He argued that implementing the order would just complicate bureaucratic procedures – encouraging the return of the “Inspector Raj” – allowing more room for corruption.
“Inspector Raj inevitably leads to harassment,” claimed Mr. Mathur.
Industry officials said they are unable to understand why the order has suddenly cropped up since no consumer complaints has been made to any court or government agency on the quality of steel products.
The Confederation of Indian Steel Producers, which groups many of the country’s smaller steel makers, have written to the Prime Minister and Minister of Steel requesting them to reconsider the order and save their businesses.
In the letter they warned that new norms could “destabilize” steel production and also affect industrial and infrastructure projects.
But the government isn’t in a mood to budge from its stand. “We are not planning to shift the deadline for meeting BIS norms. Steelmakers had enough time over the last few years to build up facilities and most have. Only some very small companies may have a problem,” K.D. Basak, a senior steel ministry official told India Real Time.
He said that even if output falls as a result of the new norms, it would be a “very slight” reduction.