The Latest Sucker Punch to Hit the Likes of JSW Steel Ltd.

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This has been seen as a government attempt to spur infrastructure growth in India, but the steel industry (JSW Steel Ltd., and others) is crying foul: recently the Indian government allowed imports of steel for major industrial projects of about US$ 20 billion and more – without quality certification.

RELATED: Here’s where little-to-no quality certification gets you.

A notification issued by the Ministry of Commerce and Industry announced that the government had provided an exemption to the import of steel and steel products for major industrial infrastructure projects from the applicability of Steel and Steel Products (Quality Control) Second (government) Order, 2012. The exemption shall be available to projects in infrastructure, petroleum, manufacturing products involving high-end technologies, nuclear reactors, defense, chemical, petrochemical and fertilizer sector projects.

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But local steel manufacturers are not amused. The imports will adversely affect them.

As it is, the cost of steel production is lower in China compared to India, and steel mills there have been dumping cheap products in India. India’s steel imports have already jumped by 69 percent to 1.528 million ton in the first two months of the current fiscal year.

The latest decision on import norms is only likely to deepen local mills’ crises.

A report by news agency Press Trust of India said the steel industry had called for an urgent review of the new decision.

Quoting JSW Steel Joint MD and Group Chief Financial Officer Seshagiri Rao, the report said the government’s latest move would further increase imports of steel, resulting in idling of local production capacity, adding to the woes of ballooning current account deficits. He said the long-term implication was dangerous, as the domestic industry was facing a demand slowdown.

The new order provides exemption to large industries to import steel and steel products even if they are non-compliant with quality standards set out in a previous 2012 order.

India imports about 6 million tons of specialized steel every year, while total annual steel production is estimated to be 72 million tons. Just two weeks ago, prior to the order, there were reports that India would soon turn a net exporter of steel. The latest directive, though, will not allow this to happen.

The exemption is subject to a few conditions, including quality certification from the recognized Quality Certifying Body of the country of origin, and the relaxation is allowed only to the actual users. The exemption would be valid for two years from the date of this notification or until further orders – whichever comes earlier.

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