Kolkata : Nirmal Saraf, Chairman, Steel Wire Manufacturers Association of India (SWMAI), recently on October 19 said that the Steel Wire Manufacturing Industry is a major employment generator in the Country.
Saraf, at the same time, expressed his grave concern that the industry is being adversely affected by acute shortage of raw materials (Wire Rods) and certain trade policies, which make it non-competitive. He pointed out the sufferings of the Industry as below:
Acute Shortage of Raw Material (Wire Rods) supply:
Raw material, i.e., Wire Rods constitutes around 70% of the total production cost of Steel Wires. Therefore, it is vital to have the availability of raw material at globally competitive prices either from the domestic sources or imports.
National industrial policy stipulates that indigenous value addition should be promoted in order to conserve foreign exchange, generate additional revenue and employment, and to fully utilize capacities for economic operation of industry. This also fulfils the objective of “Make in India” and of attaining the vision of “Aatmanirbhar Bharat” by making India self-reliant by reducing its dependence on imports, and by promoting a large manufacturing hub for domestic and export markets.
In the last 3 months, wire rods from large-scale steel mills has become scarce. Facilities such as SAIL’s IISCO (Burnpur), RINL (Vizag), and SAIL (Bhilai), could not meet production targets for a variety of reasons. Tata Steel and JSW, among others, were also offering limited quantities to the domestic market. Electrosteel Steels was forced to shut down all operations for three weeks. In 3 months, prices across the market shot up by approximately 25%. Supplies became erratic, and downstream industries found unprecedented shortage of raw materials forcing them to curtail and, in some cases, suspend operations. The hardship, that was experienced by the Steel Wire Industry owing to outbreak of “COVID-19”, was compounded by this shortage of raw materials leaving them totally stranded.
Moreover, there is a technical issue, that both the Wire Rods and TMT rebars in coils are being produced in the same WRM and the production of TMT Rebars does not require adherence to high technicality like controlled cooling, etc. Therefore, when the demand for TMT becomes higher, the steel producers shift their rolling plans from Wire Rods to TMT. Therefore, the Steel Wire Manufacturing Industry has to tolerate the whimsicality of the large steel producers.
It would be evident from the Government’s database that during the period April-July 2020, total steel imports have declined by 42%, whereas, exports of the same have gone up by 140%; consumption has declined by 43%. The same trend is being observed in case of Wire Rods. Therefore, when the domestic downstream industry is starving for raw materials, the same is being exported by the major steel producers, leaving the downstream industry on the verge of destruction. Saraf is concerned about the fact that, if the downstream industry would not be able to grow due to want of raw material, how the Prime Minister’s clarion call for “Aatmanirvar Bharat” would become successful? The cascading effect of the situation is that the downstream industry’s products, i.e., the finished value-added products, are becoming uncompetitive ( due to high input prices and erratic availability of inputs leading to lower capacity utilisation ) compared to the imported finished products. In this process, people will go for more and more imports of finished products, resulting in lowering demands for domestically manufactured finished steel products, which is also against to the campaign of “Aatmanirvar Bharat”.
Non-Tariff Barriers to Imports, in the form or Quality Control Orders on Raw Materials negating the “Ease of Doing Business” Doctrine:
Indian Steel Wire Industry is suffering grievously due to implementation of Steel and Steel Products’ (Quality Control) Orders. International suppliers are reluctant to go through the cumbersome process of obtaining BIS certification. This has resulted in drastic reduction in the number of raw material sources. Many specific grades covered by the QC order are not regularly produced in India. International suppliers are unwilling to obtain BIS certification since the quantities required for these grades are small. Many units have discontinued business and put growth plans on hold. These units are denied superior quality materials as per widely accepted international standards such as EN, ISO, JISG, DIN etc., at internationally competitive prices. They are neither being able to compete in the international market nor counter the threat of lower priced imported engineering goods. The vision of “Aatmanirvar Bharat” and making India the factory of the world cannot be realized unless Quality Inputs to Industry are available at internationally competitive commercial terms. The Quality Control Orders have become a non-tariff barrier to imports. This move has left the steel user industry at the mercy of a few domestic steel makers. Non availability of raw materials can in no way support the ease of doing business.
The Chairman, SWMAI, explained that the Ministry of Steel had taken initiatives to protect Steel industries in India by imposing various tariff and non-tariff barriers against imports. As a result, there is a drastic drop in the steel imports and the domestic Steel Manufacturing Industry has experienced a turn around.
Most of the steel makers have booked profits in their balance sheets and have shown a strong EBITDA, which is very fortunate to the Industry. Many weak steel companies in India are being taken over by the strong companies, so the uncertainty in the steel industry is totally over. Now it is the time to revive the steel user industry, i.e., the downstream steel industry, like steel wire manufacturing, which has potential for more employment generation and earn more foreign exchange.
In view of the above, to provide relief to the domestic steel wire manufacturers, Mr. Saraf has requested the Authorities to consider the following pleas, on behalf of the Industry:
The Government must create mechanisms to ensure sufficient availability of scarce raw materials, either from domestic sources or from imports. A level-playing field must be given to the downstream steel industry for sourcing their raw material. Innovation in the downstream steel sector requires uninterrupted access to diverse raw materials. Therefore, ensuring the availability of such materials through all avenues, including through minor import allowances for individual firms, is a potentiality worth exploring.
To ensure availability, wire rods could be imported at a reasonable cost, by actual consumers of wire rods, might be capped to 20% of their annual capacity. This, if allowed, would ensure a stable and competitively priced raw material supply to the Industry. In the absence of stable and competitive raw material supply, in this case Wire Rods of all sizes and grades, the wire industry is struggling to stay afloat and grow.