Nepal’s steel utensil exports to India have come to a complete halt after India made it mandatory for raw materials used in steel products to carry a quality certification mark.

Previously, only finished goods required certification from the Bureau of Indian Standards (BIS). This rule was originally aimed at reducing imports from China. However, with India extending the requirement to raw materials, Nepali manufacturers, especially those operating within the Special Economic Zone in Bhairahawa, have been thrown into crisis.

Back in 2020, India had directed the BIS to implement compulsory quality norms for imported products to align with global standards. The move was widely seen as a way to regulate the flow of Chinese products through neighbouring countries.

India had already banned Chinese mobile applications and restricted the import of more than 370 Chinese items.

Industry insiders believe this new rule is part of the same strategy.

"India does not want anything from Nepal that has Chinese parts, be it steel or hydroelectricity. This is very worrying for Nepal's major exporters," said one exporter who declined to be named.

Traders said that just as Nepali companies managed to meet the earlier BIS standards for finished goods, India added a new requirement—BIS certification for foreign-origin raw materials. They viewed this as a fresh trade barrier.

Currently, two major companies, Panchakanya Steel and Bhistar Global Pvt Ltd, operate in the Special Economic Zone and export steel products to India. Panchakanya previously exported stainless steel tanks, while Bhistar exported a range of domestic steel utensils.

Devendra Sahu, General Manager of Panchakanya Group, said exports have completely stopped due to the new regulation.

"Earlier, we were exporting products after receiving a certificate of production from Nepal's Department of Industry by adding value to the imported raw materials," said Sahu. "But now, the regulations pretty much insist that the raw material also be Indian, while the production can take place in Nepal."

Bhistar had already secured BIS certification for its finished goods. However, the factory was forced to shut down because its raw materials—mostly imported from China—now also require BIS certification, which is not viable.

The company reached out to the Siddhartha Chamber of Commerce and Industry and other relevant bodies for help.  "We import raw materials from China, add value in Nepal, get certified by the Federation of Nepalese Chambers of Commerce and Industry, and then treat it as a Nepali product," said Arbind Tripathi, Chief of Accounts at Bhistar Global.

Before the new regulation, Bhistar produced around 400 tonnes of kitchenware each month. Since exports stopped, production has dropped to just 20 to 30 tonnes for the domestic market. Tripathi said about 200 tonnes of finished goods are now stuck in their warehouse due to the export ban.

Ram Prasad Regmi, Chief of the Bhairahawa Customs Office, confirmed that exports have been halted for nearly two months. "India upgraded new software for its Steel Import Monitoring System recently," he said. "Nepal is not featured in that system, which resulted in technical problems."

Regmi said the main cause of the issue is India’s decision to mandate BIS certification for both raw materials and finished goods.

"Nepali producers have always used raw materials from wherever they are least expensive. Now only raw materials originating from India will be permitted for export to India," he said. "Otherwise, there will be obstacles."

He added that the Indian policy goes against global trade practices. "No other Nepalese product category exported has to obey such a regulation. Now that raw material imports are cut off, some of the factories have to close down," he warned.

Regmi also pointed out that these steel exports had helped Nepal earn foreign exchange and reduce its trade deficit with India. "This is not a business problem. It impacts our country's trade performance," he said.

Trade data shows that steel and iron utensils were Nepal’s sixth-largest export item last fiscal year. The country exported 38,725 tonnes worth Rs 736.25 million.

Netra Acharya, President of the Siddhartha Chamber of Commerce and Industry, said India’s rule is clearly restrictive. "India had enforced this regulation as Nepal imports raw materials from China," he said. "But it is virtually impossible to obtain a BIS logo on raw material. This has placed investors in a difficult situation."

Acharya added that the chamber informed the authorities as soon as the problem emerged.
"We keep pushing the concerned government agencies to move. The private sector can't fix it alone. The government needs to take the lead and approach India through diplomacy," he said.