Some of the top players in India's automotive industry are worried about the government's decision to ban production, storage and sale of steel without Bureau of Indian Standards (BIS) certification, a step that they fear would hurt, even halt, their manufacturing operations.
The ban, which will take effect on March 15, though is seen by the steel industry as the most effective move so far to curb steel imports, which have been on the rise at the cost of local producers. While the compulsory BIS certification is good news for the steel industry, it is not so for auto makers. Car makers currently import hightensile automotive steel from Japan and Korea for production of critical components, top sources in the auto industry said. If the steel ministry's order to make BIS certification compulsory, production will come to a stop across the passenger vehicle industry, they claimed
"The auto industry uses its own proprietary technology to certify its vehicles and chooses the appropriate steel for such certification. BIS standards are much more relaxed than the international standards of Japanese and Korean manufacturers, where the auto industry is mostly importing from," said a senior executive at a leading car maker, who did not want to be named.
"This order will adversely affect manufacturing in the country." Though no official numbers are available on the import of automotive steel, industry estimates suggest at least 20% of steel used by passenger vehicle manufacturers come in from Japan and Korea. Some industry experts say steel similar to what these companies import is available locally, and the auto makers are trying to protect their longterm contracts with foreign steelmakers.
Vishnu Mathur, directorgeneral of the Society of Indian Automobile Manblock ufactures, however, said even if the technology is available, the volume of imported autograde steel is low and does not justify local production. "Currently, the industry has inventory for a month or so. But if the government does not remove the requirement or extends the time for certification, production across the PV (passenger vehicle) industry will stop. It's not about the quantity imported. The fact is even if one small part is unavailable, manufacturing will be affected," he said. Vinnie Mehta, director general of the Automotive Component Manufacturers' Association, echoed the sentiment. "Over 70% of the cost of a component is raw material, which is largely steel. Even if we were to take BIS certification for imported steel, which is of higher quality, it is a time consuming process. It cannot be completed within three months (the government issued the order in December)," said Mehta. BIS certification involves a visit of Indian government officials to steel mills overseas to certify their products and processes. This usually takes 612 months, Mehta said.
Source: Economic Times