CRGO Steel shortage threatens India's Power sector expansion, warns GTRI
- In Reports
- 04:31 PM, Oct 28, 2024
- Myind Staff
India’s power sector faces a critical shortage of Cold-Rolled Grain-Oriented (CRGO) steel, essential for manufacturing transformers and electric motors, according to a report by the Global Trade Research Initiative (GTRI). The think tank noted on Monday that this shortage could significantly impact India’s ambitious power expansion plans, as the sector grapples with a 30 percent shortfall in CRGO steel.
GTRI highlighted that domestic production meets only 10-12 percent of India's CRGO demand, leaving the country heavily reliant on imports. “The immediate cause of the CRGO steel shortage is import uncertainty caused by the delayed license renewals by the Bureau of Indian Standards (BIS) for many foreign suppliers from Japan, South Korea, and China,” GTRI stated. Many licenses are soon set to expire, creating supply disruptions. BIS requires foreign suppliers to hold certification under a Quality Control Order (QCO), ensuring quality but limiting access to only a few approved grades and vendors, it explained.
“The entire BIS process needs an urgent review by independent auditors,” GTRI recommended, emphasising the need to streamline approvals to prevent further disruptions. GTRI Founder Ajay Srivastava warned of potential long-term risks, stating, “In the long term, India must prioritise local production, as CRGO is now considered a strategic material, and supply may remain limited. Without action, this shortage could jeopardise India's ambitious energy goals.”
CRGO steel, with its grain orientation that reduces energy loss, is crucial for transformer cores, a core component in India’s power distribution network. In fiscal year 2024, India’s demand for CRGO steel was around 400,000 tonnes. However, with domestic production at only 50,000 tonnes, India relied on imports of 239.2 thousand tonnes from China, Japan, Russia, and South Korea. After exporting 11.4 thousand tonnes, only 277.8 thousand tonnes remained for local use, leaving a shortage of 122.2 thousand tonnes, or 30.6 percent of total demand, GTRI stated.
India’s CRGO steel demand is projected to rise by 10-12 percent annually, driven by the power sector’s growth and the target of integrating 500 GW of renewable energy into the grid by 2030. Srivastava emphasised the additional pressures, explaining, “The demand will also grow as the Bureau of Energy Efficiency has mandated a star-label upgrade for distribution transformers starting January 1, 2025, pushing the industry to seek higher-grade CRGO steel.”
"This CRGO shortage could impact energy and manufacturing targets. This shortage also limits India's transformer and motor exports. Micro, Small and Medium Enterprises (MSMEs), who need small amounts of this steel, are hit hardest, as prices have soared due to uncertain supplies," Srivastava added.
To address this shortage, GTRI suggested immediate and long-term measures. “The BIS should expedite its approval process for CRGO imports to prevent license expirations and ensure a steady supply,” GTRI advised. Additionally, BIS should consider expanding the list of approved CRGO grades and suppliers to help smaller manufacturers and MSMEs, who are the most vulnerable to these shortages.
“At the government level, support for domestic production is crucial, and allowing zero-duty imports of raw materials for CRGO production, as seen in countries like China, the US, and Germany, could boost local output,” GTRI recommended. According to the think tank, building a CRGO plant would require an estimated investment of around USD 400-USD 600 million for a facility with an annual capacity of 100,000-150,000 tonnes and could take 3-5 years to complete, with potential government incentives supporting this development.
The BIS’s Quality Control Order (QCO) for CRGO steel, implemented in 2020, mandates that all CRGO steel imported for use in India must meet specific performance standards under BIS certification. This policy, while ensuring quality, has now led to severe supply constraints, sparking concerns for India’s power sector as it scales up its energy infrastructure.
Comments